Investors have maintained big bets on European equities amid growing caution over the global economic recovery, according to the latest fund manager survey from Bank of America (BofA).
The proportion of global investors who say they are net overweight Eurozone equities has grown by 4 percentage points month on month to a net 45 percent, the highest level since January 2018, finds the survey.
Investors have also added to positions in US equities, with a net 11 percent of respondents now overweight the region, says BofA, which polled 239 fund managers with collective assets under management of $742 bn. The research took place between July 2 and July 8.
A net 14 percent of respondents remain net overweight in emerging markets but this figure has fallen by 17 percentage points between June and July, finds the survey. At current levels, investment in emerging markets equities is slightly below the long-term average, notes BofA.
The shifts in asset allocation come as investors dial back their expectations for global growth. The speed of recovery is easing in China, according to recent data, and fund managers also think US economic growth is about to top out.
‘Global growth expectations have peaked,’ write BofA analysts in the research. ‘July economic growth expectations are now at a net 47 percent, down from the 91 percent peak in March 2021.’
Adding to concerns over the rate of growth, investors now expect the size of the US infrastructure package to be $1.4 tn, a fall from $1.7 tn in last month’s survey. Investor cash levels, meanwhile, have ticked up month on month from 3.9 percent to 4.1 percent.
The July research shows little change in how investors would like companies to use their spare cash. ‘A net 46 percent of investors want corporates to spend cash on increasing capital spending, down 6 percentage points,’ write the authors.
‘The net percentage of respondents who now advocate returning cash to shareholders is steady at 15 percent – the highest since April 2019.’
