A recent survey conducted by BofA Merrill Lynch Fund Manager reflects growing pessimism over the looming 2013 fiscal cliff. A total of 253 panelists with $681 billion in managed assets participated in the September survey.

For the month of September, 35 percent of investors surveyed listed the fiscal cliff as their biggest concern in contrast to the EU debt Crisis at 33 percent. The EU debt crisis had previously been listed as the biggest concern for investors at 48 percent for August. But as concern over the debt crisis in the EU subsides, investor focus has shifted to Congress' budget negotiations over tax cuts.

"Investors now view the U.S. fiscal cliff as a greater threat than the eurozone — and the upcoming election is putting these fears into sharper focus,” said Michael Harnett, chief investment strategist at BoFA Merrill Lynch Global Research

Although disheartening, the survey’s results shouldn’t be surprising, as many within the government and private sector, including the CBO, Federal Reserve, and Moody’s, have made it known that if scheduled tax hikes go into effect, a double-dip recession will be inevitable. 

Investor trepidation over fiscal cliff has resulted in a significant decrease of their U.S. equity holding.  According to the survey, investors reduced their exposure to U.S. equities from 13 percent in August to 11 percent overweight for September.  September marked the third consecutive month investors reduced their exposure to U.S. equity, indicating a trend among investors to resort to a bearish view of the U.S. market.  

The private sector’s loss of confidence in the U.S. economy will continue to occur unless families and businesses can be assured that their taxes will not increase. Not only is this necessary to avoid a recession, it is also needed to restore confidence in the U.S. economy.