Investors “increasingly bullish” on Europe

Global investors are turning to Eurozone stocks and away from US equities in what is described as the fifth largest rotation since 1999.

Allocations to Eurozone equities have risen to a 15-month high as fund managers have heavily increased their positions recently.

However, the fund managers – who have almost doubled their allocations to the Eurozone in comparison to index weightings – were also warned against complacency.

Ronan Carr, European equity strategist at Bank of America Merrill Lynch (BofAML) – which surveyed over 200 investors – said: “In spite of the French Presidential election starting in less than a week, investors’ perception of Europe is increasingly bullish. Although we agree on the allure of Europe’s earnings recovery, complacency looks extremely high.”

Many investors considered euro-based stocks to be undervalued, the BofAML fund manager survey found.

Over 80% of those survey considered US equities overvalued and allocations to US equities plunged to the lowest levels since January 2008.

Some other survey findings included:

  • 44% of investors were overweight emerging market equities, up from net 18% underweight in March
  • 32% said global equities were overvalued
  • Fund managers’ cash levels rose to 4.9% from 4.8% in March, remaining above the ten-year average of 4.5%
  • A net 21% of fund managers think the U.S. dollar is overvalued, down from net 32% last month
  • Nearly a quarter of fund managers cited EU disintegration as the biggest tail risk – though this fear was falling 
  • 47% said emerging market equities were undervalued.

©2017 funds europe

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