Investors are more optimistic in August about the economy than they were in July, according to a survey.

The latest Bank of America Merrill Lynch survey of fund managers found that investors are more bullish about the outlook for the global economy and corporate earnings. The results were released Tuesday.

A net 5% of respondents predicted the global economy will improve in the next year. In July, a net 12% predicted the world economy would deteriorate. Meanwhile, the majority of respondents are expecting below-trend growth and inflation, the same percentage as last month, but few respondents are expecting a double-dip recession.

"The spotlight of investor pessimism has shifted away from China and Europe to Japan and the U.S.," said Michael Hartnett, chief Global Equities strategist at B of A Merrill Lynch Global Research, in a press release. "Investors clearly remain cautious, so better news on U.S. growth and fiscal policy would be a pleasant surprise."

Investors reduced their cash holdings in August and moved more money into equities and away from bonds, according to the survey. They moved away from U.S. and Japanese equities, but increased demand for euro-zone equities. "Investor sentiment on Europe has staged a remarkable recovery in the past few months, underpinned by greater optimism about Europe's banks. Economic data now has to continue to support this shift," said Gary Baker, head of European equities strategy at B of A Merrill Lynch Global Research, in the press release.

The survey showed that investors think the dollar looks undervalued, while the yen is seen as overvalued. One hundred and eighty seven fund managers participated in the survey.

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