Global fund managers have continued to hold a positive outlook for US equities even though trimming stakes in Eurozone, Japan, UK, and emerging market place stocks, a Bank of America survey showed. Allocation to US equities remains steady at a net 11% overweight in August, even though allocation to eurozone stocks is down 9 percentage points on month-to-month basis. Allocation to emerging markets is down 11 percentage points to the lowest considering that May 2020. BofA’s survey showed that fund managers are now turning defensive in allocations, investing more in the healthcare and insurance coverage sectors, even though growing money positions.
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The Dow Jones Industrial Average has soared 15.5% so far this year. The index has trimmed gains not too long ago, but it nevertheless remains positive more than the last one month. “FMS (fund managers) conviction in US equities continued to rise while optimism for Eurozone and EM equities have continued to wane,” BofA mentioned in the report. For fund managers across the globe, ‘long US tech stocks’ nevertheless remains the most crowded trade with almost 40% backing the identical. Meanwhile, 11% of the investors have backed the ‘short china stocks’ trade this month.
Among sectoral allocations, fund managers have improved positions in healthcare, insurance coverage, utilities, and money as compared to the earlier months, the survey showed. “Investors have gotten slightly more defensive with an increase in healthcare, insurance, utilities and cash. They have also modestly trimmed their inflation exposure to materials, commodities, EM, and energy,” BofA added. Fund managers nevertheless stay overweight equities, on the other hand, the allocation is down to 54% against 62% in April. Cash position of fund managers is the highest now, considering that October 2020.
With international fund managers trimming stakes in emerging markets, FIIs have been pulling revenue away from Indian markets as well. So far this week, FIIs have pulled out Rs 2,026 crore from domestic stocks. In the month of July, foreign investors had been net sellers promoting almost Rs 19,847 crore of securities.
Inflation a major threat reduce development projections
Going ahead, the BofA survey showed that fund managers see inflation as the largest tail threat for international stock markets. Since March this year, institutional investors have been cautioning investors about inflation and a bond tantrum. 84% of the survey respondents think the US Fed will signal tapering prior to the finish of this year. With this fund managers have also reduce international development projections, as now only 27% think the international economy will enhance, the lowest considering that April last year. Earlier in March this year 91% believed the economy would enhance.