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Ukrainian servicemen guard a checkpoint near the village of Strelkovo in Kherson region, adjacent to Crimea, on March 16, 2014.VALENTYN OGIRENKO/Reuters

If you're wondering how to react to growing geopolitical tensions in Ukraine and evidence that China's economy is slowing, look to the smart money: They are growing nervous.

Bank of America's latest survey of fund managers, consisting of 241 panelists with a combined $636-billion (U.S.) in assets under management, suggests that the pros are reeling in their exposure to the markets – by raising their allocation to cash and reducing their allocation to equities.

"Responding at a point of growing tension in Ukraine, 81 per cent of investors said they see geopolitical risk posing a threat to financial markets stability – more than four times the reading one month ago," said a release accompanying the survey's results.

"Twenty-seven per cent of investors say that a geopolitical crisis is the biggest tail risk – up from 12 per cent in February. At the same time, investors continue to express concern about the prospects for emerging markets – with sentiment towards China's economy falling further."

The Chinese government said last week that it was targeting economic growth of 7.5 per cent, but some observers believe the economy could struggle to reach that goal.

Other numbers in the Bank of America survey also reflect caution. A net 14 per cent of managers are taking lower-than-average risk, up from a net 2 per cent in February. A net 16 per cent of asset allocators are overweight cash, up from a net 12 per cent last month. The average cash balance is now 4.8 per cent, which is high.

Meanwhile, a net 47 per cent of regional fund managers expect China's economy to weaken further this year, up from a net 41 per cent in February.

The shift to safer ground comes amid considerable uncertainty in global markets this year. The S&P 500 is up just 1 per cent in 2014, after sitting in negative territory for most of January and February.

The U.K.'s FTSE 100 is down 2.2 per cent this year and Japan's Nikkei 225 is down 11.5 per cent.

Besides geopolitical risk, the disappointing performance comes at a time when the U.S. Federal Reserve is tapering its monthly bond-buying program, known as quantitative easing. QE provided a nice boost to stocks, so the removal of stimulus raises concerns that stocks could drift back down.

And, of course, the bull market in stocks just passed its fifth anniversary, adding to worries that the days for rising stock prices are numbered.

But the S&P 500 has rebounded over the past two days – curiously, after Russia annexed Crimea, drawing sanctions from the European Union and the United States. The bullish take is that things aren't worse: Russia's involvement in the region has been relatively bloodless and Russian President Vladimir Putin says he has no interest in the rest of Ukraine, easing worries about a broader conflict.

The gold market believes Mr. Putin. Gold, which recently spiked to a six-month high of $1,385 (U.S.) an ounce – reflecting a rush into safe investments – has slid $30 over the past two days.

The oil market is a believer, too: The price of West Texas Intermediate, the U.S. benchmark oil, has fallen about 6 per cent from a six-month high of $105 a barrel in early March, amid fears that Russia would turn off the gas taps to Europe.

Did the commmodity reversals and the rebound in stocks take the smart money by surprise?

Bank of America believes that the smart money can be contrarian indicators – turning cautious when stocks are set to rise. In particular, they believe that high cash levels mean that money is on the sidelines and ready to flow back in to stocks.

That is an enticing view when the stock market is beaten up and avoided. When the market is near record highs, though, such high cash levels look like a warning sign.

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