Money managers are moving into eurozone equities and out of U.S. equities, said Bank of America Merrill Lynch's monthly fund manager survey released Wednesday.
Eurozone equity allocations rose to a net 48% overweight in April, the highest level in 15 months and up from a net 27% overweight in March, while U.S. equity allocations fell to a net 20% underweight, the lowest level since January 2008 and down from a net 1% overweight last month.
Accordingly, a record number of investors (net 83%) believe U.S. stocks are overvalued. A net 21% of managers believe the U.S. dollar is overvalued, down from a net 32% in March.
The April survey also saw global equity allocations fell to a net 40% overweight, down from 48% in March, while emerging market equity allocations rose to a net 44% overweight, the highest allocation in five years and up from a net 18% overweight in March. A net 47% of investors believe emerging markets equities are undervalued, up from a net 44% last month.
Bond allocations, meanwhile, rose to a net 62% underweight in April, up from a net 65% underweight in March. Commodity allocations fell to a net 4% underweight from a net 1% overweight, and average cash holdings rose to 4.9% of managers' portfolios, up from 4.8%.
Other findings from the April survey include:
- European Union disintegration remains the biggest tail risk, according to 23% of investors, down from 33% last month, followed by delayed U.S. corporate tax reform (21%) and trade war (17%);
- only 5% of survey respondents expect the U.S. Congress to pass tax reforms before its summer recess;
- long U.S. dollar remains the most crowded trade, according to 27% of investors;
- a net 30% of respondents believe the euro is undervalued, the highest reading since October 2002, and up from a net 20% the previous month; and
- a net 50% of investors believe global profits will improve over the next year, down from 57% in March.
The survey of 203 money managers representing $593 billion in assets under management was conducted April 6-12.