MILAN/LONDON (Reuters) -Investor sentiment surged in July to its most bullish since February, driven by the biggest jump in profit optimism in five years and a record surge in risk appetite, Bank of America's ( BAC ) latest global fund manager survey showed.

Cash levels fell to 3.9% in July, a low that triggered an in-house "sell signal" from the investment bank's strategists.

In a note published on Tuesday, BofA said the survey showed sentiment was getting somewhat exuberant, or "toppy", but fund managers' overweight positioning in stocks was not yet at extreme levels and bond market volatility remained low.

"Greed (is) always much harder to reverse than fear," the bank's analysts said, adding that investors were more likely to stick to a "summer of hedging and rotation" rather than laying on big short bets or retreating from the market altogether.

The S&P 500 has hit record highs this month, while cash has also been pouring into bitcoin, as investors work on the assumption that U.S. President Donald Trump will not make good on his threat to impose hefty tariffs on major trading partners by his new deadline of August 1.

Volatility measures for stocks, bonds and currencies remained muted, suggesting there is little sense of panic to hedge or shift positions, as evidenced by the BofA survey, which polled 211 fund managers with $504 billion under management.

The bond market has seen pressure particularly in long-dated debt, as investors prepare for a rise in government borrowing and spending. The U.S. Treasuries market has the added pressure from Trump's repeated threats to remove Federal Reserve Chair Jerome Powell, because he believes U.S. rates should be lower.

The BofA survey showed 81% forecast one or two rate cuts by year-end.

"Asked who is most likely to be the next Fed chairman: 26% said Bessent, 17% Warsh, 14% Waller, 7% Hassett," BofA said, referring to Treasury Secretary Scott Bessent, former Fed Governor Kevin Warsh, current Fed Governor Christopher Waller and White House economic adviser Kevin Hassett, respectively.

In currencies, the survey showed fund managers were holding their biggest overweight position in the euro since January 2005. The euro has been a major beneficiary of investor flows out of the U.S. dollar this year, having gained nearly 13% this year to around its highest in almost four years.

Those surveyed said they believed the short dollar trade was the most crowded right now, although the proportion of investors willing to hedge dips in the dollar fell to 33% from 39%, which would suggest a smaller number think the U.S. currency has much further to fall.