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BofA: Managers most bearish on U.S. equities since 2008, shifting to eurozone

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.