Investors remain wary of stocks, despite the market's strong start in 2012 and hopes for continued progress on the jobs front, according to the latest MoneyShow Sentiment Indicator.

The survey, completed late last month, also suggests the inflation threat remains a nagging concern, even though economic growth is widely expected to remain modest.

Although investors appear to have invested some of their ample cash reserves since the last survey was taken in late January, nearly 18% continue to keep more than half of their portfolio in cash, while an additional 27% are sitting on a cash cushion of at least 20%.

Domestic stocks, especially large caps, remain the overwhelming favorites for new investment. Precious metals have lost some popularity of late, coming in a distant third behind US small-caps. Real estate and REITs have picked up some fans to place fourth, displacing corporate bonds from that perch.

Investors' mood might be described as perfunctorily bullish, with 40% expecting gains of less than 10% from recent levels for the balance of the year, and another 26% counting on the market to mark time. Nearly 23% are forecasting a market drop, up from 21% three months ago, though the proportion of respondents expecting a decline of at least 10% has fallen.

Perhaps investors are cautious because of their growing conviction that the Federal Reserve might soon start draining the punchbowl. A slight majority (54%) now expects the Fed to begin unwinding some of its asset purchases by the end of this year, perhaps a year ahead of Wall Street's timetable. Three months ago, only 43% thought the Fed would act with such alacrity.

Yet if the Fed does change its tune, it won't be because of an overheating economy, according to investors. Sixty-two percent of the respondents expect the gross domestic product to continue to grow at a rate below 3%, while 26% still think growth will slow toward stall speed and nearly 5% expect a recession. Only 7% are counting on the economy to expand faster than 3%, optimism on that score dwindling since January.

On a happier note, 38% of the respondents expect unemployment of no more than 8% by year's end, up from 33% in January. Investors are also slightly more inclined to expect President Obama's re-election, with 54% predicting a second term, up from 51% three months ago.

As for change, investors no longer seem to believe in much of that, extrapolating the current economic and financial environment into year's end with little more than the occasion tweak here or there. If the future proves more interesting than that, expect some dramatic moves in asset prices.

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