A recent survey from Bank of America Global Research has revealed a record rotation away from U.S. equities and into European stocks. According to the survey, global investors now have a net 39% overweight position in European equities—up from just 12% the previous month—marking the sharpest shift since mid-2021 and the most pronounced rotation on record since 1999. In contrast, investors reported being net 23% underweight in U.S. stocks, the highest level observed since mid-2023, compared to 17% in February.
Significant Shift in Allocation:
Global investors have dramatically reduced their exposure to U.S. equities amid concerns over stagflation, trade wars, and the perceived end of U.S. exceptionalism. This pivot is the fastest ever seen, based on survey data spanning back to 1999.
Increased Cash Holdings:
Investors have raised their allocation to cash from 3.5% to 4.1%, a move that ended the "sell signal" triggered in December, suggesting a rapid downturn in market sentiment.
Optimism for European Growth:
The survey shows a strong tilt towards European stocks. Nearly 60% of respondents now expect stronger growth in Europe over the next twelve months—driven largely by Germany’s fiscal stimulus and increased EU defense spending—up from just 9% two months ago. However, near-term optimism has softened, with only 30% of investors expecting short-term gains compared to 66% previously.
Global Economic Outlook:
While 44% of investors now expect a slowdown in global growth over the next year, concerns over U.S. economic performance have also intensified, with 83% predicting a near-term slowdown. Despite these concerns, the majority still forecast a soft landing, with only 11% expecting a hard recession.
This record rotation suggests that investors are increasingly skeptical about the prospects of U.S. equities and are seeking refuge in European markets, which currently offer better growth prospects and potentially more stable economic policies. The data indicates that while U.S. markets continue to face headwinds from trade policies and domestic challenges, European equities might benefit from supportive fiscal measures and improved growth expectations.
To further analyze these market trends and monitor the performance of U.S. versus European equities, consider using the following Financial Modeling Prep APIs:
\u2705 Company Rating API
Access comprehensive financial ratings and performance metrics to evaluate the resilience and potential of stocks in both U.S. and European markets.
\u2705 ETF Holdings API
Examine ETF holdings to gain insights into how institutional investors are allocating their assets, particularly the increased weighting in European equities.
The Bank of America survey indicates a historic rotation away from U.S. stocks, driven by growing concerns over economic headwinds and a sharp increase in confidence in European growth prospects. As investors adjust their portfolios in response to these shifts, keeping a close eye on key performance metrics and institutional allocations via reliable FMP APIs can provide crucial insights for navigating this evolving market landscape.
