Global fund managers are moving into European stocks with renewed risk appetite, according to a benchmark survey published Wednesday, as investors shrug off election concerns and move cash out of overbought U.S. markets.
The BofA Merrill Lynch April Fund Manager Survey, which polls investors who control nearly $600 billion in global assets, indicates that cash is moving out of the U.S. and into European stocks at one of the fastest rates in nearly two decades. At the same time, the preference for Eurozone shares over those listed in the U.K. is sitting near an 18-year high, the survey suggested, with French stocks now a 22% net overweight.
"Investors are showing love for Europe and scrambling out of U.S. equities, as the majority find U.S. stocks overvalued and perceive a risk of delayed U.S. tax reform," said BofAML's chief investment strategist Michael Hartnett.
The survey said that the April rotation into European stocks hit a 15-month high, with a net 48% of respondents overweight the region, capping the fifth-fastest rotation out of U.S. stocks since 1999 as American equity allocation hit the lowest levels since 2008. In fact, a record number of investors -- 83% -- said U.S. stocks were too expensive and only 5% expect Congress to get a tax reform package passed before the summer recess.
"The post-Trump rise in global risk appetite has stalled," the survey noted. "Global growth expectations fell to 50% from 58% last month ... inflation expectations retreated from recent highs of 80% to 75%." Cash balances at the fund's surveyed rose 0.1 percentage points to 4.9% last month and remain above their 10-year averages, BofAML noted.
The BofAML April Global Fund Manager Survey was conducted between April 6 and April 12, the bank said, and polled 203 investors with $593 billion in assets under management.