Investors are so worried about Greece and Federal Reserve actions that a record number of them are bracing for a sharp drop in stocks.

Fund managers globally have boosted their cash levels, reduced equity holdings and hedged their portfolios against a market decline, according to a survey by Bank of America Merrill Lynch.

The bank said the portion of investors taking out “protection” against a sharp fall in equity markets in the next three months reached a net 26 percent, the highest level in survey data going back seven years. Cash levels have reached an average 4.9 percent of holdings, the highest since January, according to BofA.

Stock and bond markets, particularly in Europe, have had major swings this year — rising with the advent of the European Central Bank’s quantitative easing program and dropping as debt-payment negotiations between Greece and its creditors stumble. Germany’s DAX index this year surged 30 percent to a record high in April before declining into correction territory with a 13 percent slide.

“We believe a peaceful Greek outcome is a necessary condition for a rally,” Michael Hartnett, chief investment strategist at BofA, said in a June 16 report obtained by Newsmax Finance. “Investors do not appear positioned for a Greek ‘worst case.’”

Only 15 percent of fund managers expect Greece to exit the euro zone, while 43 percent foresee a good resolution. Forty-two percent anticipate a Greece default without a “Grexit.”

The most “crowded trade” is a long position in the U.S. dollar compared with other currencies, fund managers said. The dollar bullishness is driven by the expectation of the first Fed rate hike in 11 years, which will draw investor cash into Treasurys providing a higher yield.

The timing of the rate hikes will add to market volatility, according to investors interviewed by The Wall Street Journal.

“We seem to be entering a new market environment and we just don’t know how markets will react to interest rates moving off historical lows,” Lon Erickson, a portfolio manager at Thornburg Investment Management, told the newspaper. “With cash, it’s pretty much in your hands so you can make a purchase quickly and react almost instantly.”

BofA surveyed fund managers from June 5 to 11, with 167 panelists overseeing $437 billion responding.

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