Investor sentiment has seen a positive shift, reaching pre-Liberation Day levels, as per Bank of America’s latest Global Fund Manager Survey. The survey, conducted in June, revealed an uptick in optimism among fund managers compared to previous months.
During the survey period, fund managers reduced their cash reserves to a three-month low while increasing investments in emerging market equities, energy, and bank stocks. Although allocations to U.S. stocks saw a slight rise, fund managers remained net underweight in this category.
European stocks, particularly in the Eurozone, garnered significant interest from investors due to fiscal stimulus measures in Germany and trade uncertainty affecting U.S. stocks. Notably, a majority of respondents expressed confidence in international stocks over U.S. stocks for the next five years, signaling a notable shift in market expectations.
While optimism has increased, concerns about a weaker global economy persist among fund managers. A substantial portion of respondents anticipates stagflation and economic challenges in the coming year. However, positive corporate earnings in the first quarter have bolstered confidence in company finances.
Respondents indicated a preference for companies to distribute excess cash to shareholders through dividends or buybacks, reflecting a shift in investor sentiment towards shareholder returns. Despite this optimism, the survey highlighted a significant decrease in exposure to the U.S. dollar, with investors being the most underweight on the dollar since 2005.
The decline in the dollar’s value has been attributed to the “Sell America” trade, where international investors are avoiding U.S. assets due to concerns over President Trump’s policies impacting the global financial landscape. The U.S. Dollar Index has witnessed a notable decline this year, signaling a challenging period for the dollar.
Overall, the survey points to a nuanced outlook among global fund managers, with a mix of optimism regarding company finances and international markets, paired with concerns about the global economic landscape and the value of the U.S. dollar.
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