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Buyers made the “greatest ever” lower to their US fairness allocations in March, as President Donald Trump’s erratic commerce struggle sparked fears over the US economic system and prompted a heavy Wall Avenue sell-off.
Allocations to US equities plunged 40 proportion factors, from 17 per cent obese in February to internet underweight 23 per cent in March, in response to Financial institution of America’s intently watched survey of fund managers.
Stagflation fears, the worldwide commerce struggle and an finish of US exceptionalism have been cited as drivers of a “bull crash” in sentiment. The month-on-month decline in investor sentiment is the survey’s largest for the reason that Covid-19 drop in March 2020.
“Originally of the 12 months traders have been all raging bulls, however . . . they’re ending the winter as bears for positive,” mentioned Elyas Galou, senior funding strategist at BofA.
“What has modified is that everybody was bullish on the US and this has light considerably,” he added.
European equities have benefited. Allocations to Eurozone shares leapt 27 proportion factors in the identical month, to the very best degree since July 2021. This was additionally the sharpest shift out of the US and into Europe since 1999, when BofA’s data started.
“It’s not shocking to see fund managers shifting away from the US market,” mentioned Trevor Greetham, head of multi-asset at Royal London Asset Administration. “It’s priced for perfection and the coverage popping out of the White Home ain’t that.”
Practically 70 per cent of traders say the “US exceptionalism” theme, which pushed the S&P and Nasdaq indices to file highs within the weeks after Trump’s election win in November, has peaked.
Buyers surveyed have been particularly detrimental about know-how shares, shifting to a internet 12 per cent underweight place: the bottom allocation for over two years.
Fund managers have been extra upbeat about utilities and banking shares, whereas including to their UK equities proportions.
Whereas investor money ranges rose barely to 4.1 per cent, authorities bonds didn’t profit from the transfer out of equities; bond allocations dropped barely and most traders stay underweight.
“It’s not a basic risk-off the place you promote every part,” mentioned Michael Metcalfe, head of macro technique at State Avenue World Markets, who described the shift as “extra rebalancing than danger aversion”.
“It doesn’t appear to be traders are getting ready for a multi-month bear market right here. What we’re seeing is a really fast rebalancing out of excessive focus trades in the beginning of the 12 months,” he added.
He identified that “the unwind had been fairly uneven”. State Avenue’s fairness market positioning information now exhibits a much bigger holding in European banks than in US tech. Metcalfe described it as “a outstanding shift in focus danger for the reason that starting of the 12 months”.
The BofA survey was carried out within the week to March 13, protecting 171 contributors with $477bn of belongings underneath administration.