Despite a recent rebound in the stock market, institutional investors are showing increasing caution toward U.S. equities, signaling a dramatic shift in global investment strategy.
New data from Bank of America’s Global Fund Manager Survey reveals a sharp turn in sentiment: as of early May, a net 38% of fund managers are now underweight U.S. stocks—the most bearish stance seen since May 2023 and one of the weakest on record since the 2008 financial crisis.
The past five months have seen a dramatic reversal. Managers who were once heavily exposed to U.S. equities have pulled back at an unprecedented pace, with net positioning falling nearly 70 percentage points—marking the steepest decline ever recorded in the survey’s history.
While confidence in American markets erodes, investors are shifting their attention to the Eurozone. Fund manager exposure to European stocks has surged, with the net overweight position compared to the U.S. nearing 75%. Just four months ago, that number stood at -62%, highlighting a complete turnaround and the highest level of preference for Eurozone assets since 2017.
This rapid rotation reflects a broader sense of unease over U.S. market valuations and economic policy risks. The downgrade of the U.S. credit rating by Moody’s on May 16—citing deepening fiscal deficits—added further weight to that sentiment. With all three major credit agencies now placing U.S. sovereign debt below top-tier status, the credibility of the country’s fiscal trajectory is under scrutiny.
Meanwhile, the fading threat of a global recession and easing trade tensions between the U.S. and China have opened the door for reallocations abroad. Even institutions like JPMorgan, which once warned that recession was the lesser evil during peak trade hostilities, have slashed their recession odds to below 50%.
Taken together, these developments suggest a structural realignment in global portfolio strategy—one where the U.S. is no longer the automatic first choice for institutional capital.
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