Fund managers have made record cuts to positions in the US stock market, the latest Bank of America study revealed. At the same time, capital is flowing to Europe, where a revival in stock markets is being fuelled by increased military spending and the easing of Germany's debt brake.
The latest global fund managers' survey (FMS), conducted monthly by Bank of America analysts, shows a sharp deterioration in investor sentiment towards US stocks. Stock markets in the United States seem to be losing their uniqueness. Other markets, especially Europe, are gaining.
Fund managers in the FMS survey reported an underweight of about 23% in U.S. equities, down 40 percentage points from the previous survey, when managers were net overweight in that market of about 17%.
At the same time, fund managers are now 39% net overweight in eurozone stocks, up from the 12% they reported in last month’s survey. It is also the highest level of optimism for European stocks since mid-2021.
The results described represent the largest rotation of institutional investors from US stocks to European stocks since the FMS survey began in 1999. Moreover, as many as 7/10 surveyed managers agreed with the statement that US stocks have already passed their peak of “exceptionality”.
The FMS study also takes into account the most popular positions taken by fund managers. The most frequently indicated bet remains a long on the shares of the “Magnificent Seven”, which is bet on by 40% of investors. A long position on European shares (23%) and a long on cryptocurrencies (9%) are also popular.
After Tuesday's down session on US stock exchanges, the US S&P500 index was 4.33% below its level at the beginning of the year. The Nasdaq Composite has already lost 9.21% since January 1. At the same time, the STOXX Europe 600 index of European listed companies has already gained 8.56%.
Bankier.pl
Also worth noting is the increase on the Polish stock exchange, where the main indices continue to break new records. The large role of foreign capital in the growth on the WSE is evidenced by, among other things, the record trading volumes observed on the Polish floor since the beginning of the year.
Hope for the awakening of the German economy
Investors are rapidly shifting their focus from the United States to Europe, betting that the era of American exceptionalism has peaked while bracing for a European renaissance fueled largely by German fiscal stimulus and increased defense spending.
On March 18, the Bundestag changed the constitution, reforming the so-called “debt brake.” The future German government was given a free hand to increase the budget deficit in the case of defense spending and aid for Ukraine. The law also provided for the creation of a special fund for infrastructure reconstruction and climate protection in the amount of EUR 500 billion over 12 years.
Germany's loosening of its budget policy is fueling hopes for a revival in the European Union's largest economy. Our western neighbor has been in recession for more than two years now. However, there are signs that the situation may soon improve.
The latest reading of the main indicator of economic sentiment in Germany (ZEW) rose to 51.6 points in March from 26 points recorded in February, significantly exceeding the market forecast of 48.1 points. The preliminary readings of the PMI index for German industry and services for March will be published next Monday.
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