A trade war is the biggest risk right now for stocks, according to a polled of fund managers by Bank of America Merrill Lynch. President Donald Trump’s trade actions in recent months are driving uncertainty among the managers.

In its July survey of funds that collectively manage $663 billion, Bank of America Merrill Lynch found 60% of the fund managers polled have reduced their equity exposure by 14 percentage points and now are 19% overweight, which Reuters pointed out is the lowest since Trump was elected in 2016. While the majority of fund managers named a trade war as the biggest risk, 19% said a hawkish mistake by the Federal Reserve or the European Central Bank was the largest risk to stocks, while 6% pointed to a Euro area and emerging market debt crisis. The survey also showed that the lowest number of fund managers since February of 2016 think the global economy will be stronger in 2019. Based on the survey from July 6th through July 12th, a net negative 11% think the economy will be stronger in a year from now. At the beginning of 2018 that stood at a positive 40%. (See more: Freddie Mac: Trade War Could Keep Mortgage Rates Down.)

Trade Tensions Ratcheting Up

The fund managers' rising concerns come at a time when trade tensions between the U.S. and China have been increasing. Trump already slapped tariffs on imported aluminum and steel as well as billions of dollars worth of goods from China. China and other countries have instituted their own retaliatory trade levies which have led to concerns about a trade war that could hurt economic growth.

Among the investment areas to take a hit over trade wars, the survey found that fund managers were particularly worried about emerging markets with the allocation toward those investments seeing the largest monthly decline in two years. At the same time fund managers remained upbeat about U.S stocks with the exposure increasing to a 9% overweight during the month.  

FAANG Stocks In Demand

The U.S. equities fund managers were purchasing during the month include Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX) and Google parent Alphabet (GOOGL). Investors also accumulated shares of  Baidu (BIDU), Alibaba (BABA) and Tencent, all of China. (See more: Tech Stocks to Take Hit in Any US-China Trade War.)  The allocation to FAANG and BAT stocks was the busiest trade with it rebounding by 10 percentage points to a net 33% overweight in July, Bank of America Merrill Lynch found in the survey. It was also the favorite sector of fund managers for the month. Meanwhile, bank stocks took the biggest hit in terms of allocations. As of July fund managers were net 3% overweight bank stocks, marking a 33 percentage point decline over two months.