A recent survey from Bank of America Global Research signals a historic shift among global investors from U.S. equities towards European stocks. Investors now hold a net 39% overweight position in European equities, up from just 12% the month before, marking the most significant transition on record since 1999. Conversely, investors report a net 23% underweight in U.S. stocks, the highest level since mid-2023, rising from 17% in February.

Key Highlights from the Survey

• Significant Shift in Allocation:
  As concerns grow over stagflation, trade wars, and diminishing U.S. global advantage, investors are rapidly decreasing their exposure to U.S. equities, marking one of the fastest pivots recorded since 1999.
• Increased Cash Holdings:
  Investor cash allocations increased from 3.5% to 4.1%, ending the “sell signal” triggered in December and indicating a downturn in market sentiment.
• Optimism for European Growth:
  Almost 60% of respondents now anticipate stronger growth in Europe over the upcoming year, driven by Germany’s fiscal stimulus and elevated EU defense spending, up from just 9% two months ago.
• Global Economic Outlook:
  Despite 44% of investors expecting a slowdown in global growth, 83% express heightened concerns regarding U.S. economic performance. Nevertheless, many still foresee a soft landing, with just 11% expecting a severe recession.

Implications for Investors

This remarkable shift suggests that investors doubt the future of U.S. equities and are seeking safety in European markets, which currently seem to offer better growth opportunities and potentially steadier economic policies. While U.S. markets encounter headwinds from trade and domestic issues, European equities may benefit from favorable fiscal measures and optimistic growth forecasts.

Conclusion

The Bank of America survey illustrates a decisive rotation away from U.S. stocks, motivated by growing apprehensions and an influx of confidence in European growth potential. Investors will need to monitor performance and institutional allocations closely as they navigate these changing market landscapes.