Investors “increasingly bullish” on Europe

Bullish_marketGlobal 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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