Bank of America Merrill Lynch's (BAML) May Global Fund Manager Survey, released Tuesday, doesn't provide much in the way of encouragement for bulls, with fund managers positioned for a "summer of shocks," particularly the Brexit. On the other hand, unusually pessimistic outlooks—especially when it comes to Britain, Japan, tech and industrials—might be intriguing for contrarians​, particularly those with long-term investing horizons.

Cashing Out

First of all, cash. Investors' average cash balance has crept up from 5.4% in April to 5.5% this month. In February, when the S&P 500 bottomed out at a two-year low, the figure hit 5.6%. That was the highest cash allocation seen since November 2001, surpassing the spikes caused by the collapse of the Lehman Brothers in 2008, the standoff over the U.S. debt ceiling in 2011, fears of a Grexit​ in 2012 and China's devaluation of the yuan last August.

For BAML, cash positions over 4.5% indicate a contrarian buy signal for equities. Anything below 3.5%, meanwhile, generates a sell signal.

All images sourced from Bank of America Merrill Lynch's Global Fund Manager Survey – May 2016.

Brexit and Other Shocks

The potential for a Brexit, a portmanteau for the U.K.'s exit from the EU, has surged in the ranking of fund managers' biggest "tail risks," rising from fifth place in March to second in April to first place in May. The U.K. will hold a referendum on the issue on June 23. Worth noting: 71% of respondents thought a Brexit was "unlikely" or "not at all likely." (For more, see also: Brexit Would Make UK "Permanently Poorer".)

A default or devaluation by China—which didn't appear to preoccupy survey respondents in April—is the second-biggest tail risk, followed by "quantitative failure," the risk that central banks' loose monetary policies will crash and burn. (For more, see also: What China Devaluing Its Currency Means to Investors.)

U.S. politics, notably, has crept up to fourth place from eighth in April. That movement likely has something to do with Donald Trump's position as the Republican party's presumptive nominee, which he clinched when rival Ted Cruz suspended his campaign on May 3. (For related reading, see also: Donald Trump for President: What Are the Chances?)

Potential Opportunities

Citing the month-over-month changes in fund managers' positioning, BAML says "contrarians should be moderately long risk via U.K., Japan, tech & industrials, and take profits in EM [emerging markets], energy, discretionary."

Fears of a Brexit have clearly driven money out of British investments over the past month, with a net 36% of fund managers saying they were underweight British equities, the lowest reading since November 2008. Allocation is 2.1 standard deviations (stdev) below the long-term average. Meanwhile 20% of investors thought the pound was undervalued, the second-highest reading on record. Given that a large majority of respondents thinks Britain will elect to remain in the EU, now might be a good time for contrarians to cross the pond.

Japan is also unpopular as of late, with a net 6% saying they are underweight in Japanese equities, the largest share since December 2012. The allocation is 0.4 stdev below its long-run average. The yen, on the other hand, is considered by a net 20% to be overvalued. (For more, see also: Japanese Stocks Tumble as Yen Hits 18-month High.)

Similarly, tech and industrials have fallen out of favor compared to their long-run averages, suggesting that contrarians have an opening. U.S. equities overall have entered their 15th straight month of net underweight positions (18% this month compared to 10% last month), with allocation 0.7 stdev below the long-term average.

On the other hand, reversion to the mean may be the iron rule of financial markets, but there's no guarantee as to when—or in truth whether—it will happen.

Timing

Finally, speaking of timing, it should be noted that the respondents to BAML's survey have relatively short investing horizons, with a weighted average of 7.4 months; 47 of the 168 fund managers surveyed are focused on the next three months or less.