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Global fund managers are increasingly cautious, with a significant drop in growth expectations and U.S. equity allocation due to tariff threats and economic uncertainty, as indicated by Bank of America's March survey. In contrast, retail investors have poured nearly $70 billion into U.S. stocks this year, driven by a "buy the dip" mentality, despite market volatility. While fund managers fear a trade war-induced recession, individual investors remain optimistic, viewing current market conditions as a buying opportunity.
Bank of America's chief investment strategist, Michael Hartnett, noted a significant surge in equity inflows, with U.S. stocks seeing $34.1 billion last week, indicating a lack of belief in a trade war-induced recession. As tariffs are set to rise, gold and bonds are viewed as safer investments, while European and Chinese equities are gaining traction amid declining U.S. sentiment.
Investors are currently dismissing the risks of a trade war, as evidenced by a significant $43.4 billion inflow into global stock funds, the highest this year. Despite a recent correction in the S&P 500, optimism remains strong, particularly in European markets like Germany's DAX, which has surged 14%. Concerns about US tariffs are reflected in declining small business sentiment in Canada, while bonds and gold are seen as less vulnerable to potential trade disruptions.
Investors are currently overlooking the potential risks of a trade war, as significant capital inflows into global equity markets continue. Bank of America’s Michael Hartnett noted that stock inflows have reached a peak this year, with rallies in German and Chinese indexes indicating skepticism about the impact of US tariffs on the economy.
Investor confidence is rapidly declining, with U.S. equity exposure hitting two-year lows and cash holdings rising, according to Bank of America's Global Fund Manager Survey. A significant 69% of fund managers believe in the end of "U.S. exceptionalism," leading to a record 40-point drop in U.S. stock allocations. Macro pessimism is at near-record highs, with 63% anticipating a weaker global economy, while gold emerges as the preferred hedge against potential economic downturns.
Investors have sharply reduced their allocation to US stocks, with a record 40% drop in March, as described by Bank of America strategists as a "bull crash." This shift comes amid a 10% decline in the S&P 500, with cash allocations rising, reflecting heightened concerns over a potential global recession triggered by trade tensions. Despite a recent uptick in stock prices, market sentiment remains cautious, with many investors awaiting the Federal Reserve's policy decision for further direction.
Investors have significantly reduced their exposure to US equities, with a record 23% underweight allocation, as pessimism about global economic growth rises. A net 44% of fund managers expect a deterioration in growth, prompting a shift towards Chinese tech and European stocks, which are benefiting from a more favorable economic outlook. Despite the decline in sentiment, a strategist suggests that the S&P 500 could rebound if trade war and inflation concerns ease.
Investors poured cash into U.S. equities at the third-highest rate in history, with Bank of America characterizing the trend as a "correction, not a bear market." Despite a significant rebound in the S&P 500, major indices are on track for their longest losing streak since May 2022, driven by recession concerns and mixed economic forecasts. Analysts suggest that if the economy avoids recession, the potential for growth could significantly outweigh the risks.
Michael Hartnett of Bank of America warns that U.S. stocks are overvalued, suggesting a potential buying opportunity when market sentiment turns bearish. He highlights the importance of key support levels and expresses optimism about the Chinese stock market, predicting a shift from technology to broader consumption as retail sales accelerate. Hartnett also notes a significant decline in government trust, contributing to a bull market in gold, while global investor sentiment shifts towards risk despite limited buying power.
Investors are increasingly bullish on US stocks, with a record 36% of respondents in Bank of America's December survey indicating an overweight position in equities, the highest in the survey's history. This shift coincides with a drop in cash allocation to 3.9% and a growing belief that the global economy will avoid a recession in 2025. Despite signs of persistent inflation, 33% of investors anticipate a "no landing" scenario, where growth remains strong without a significant decline in inflation.
Michael Hartnett
People
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