LONDON (Reuters) – The numbers of fund managers who say they are “underweight” U.S. stocks has hit a 10-year high, according to Bank of America Merrill Lynch’s (BofA-ML) monthly survey of global fund managers, even as benchmark indexes there hit record highs.
The survey, which polled 214 asset managers with $629 billion under management and was carried out between Sept. 1-7, showed allocations to U.S. shares fell to a net 28 percent underweight, an out-of-favor level last seen in November 2007.
Bullishness on emerging markets stocks rose with 47 percent of those surveyed “overweight” compared 39 percent last month. Enthusiasm for euro zone equities fell slightly but more than half those surveyed still remain “overweight.”
In terms of sectoral allocation, “global investors continue to favor technology, banks, pharma, discretionary, insurance, industrials and materials and avoid utilities, telecoms, energy and staples”, BofA-ML said in a report.
Fund managers still hold a relatively high level of cash in portfolios, BofA-ML said, suggesting risky assets still had more room to appreciate if that cash returned to the market.
“High equity valuation doesn’t look euphoric until cash levels start to drop”, BofA-ML said, while noting that investors seeking to protect themselves against a fall in stock markets rose at the biggest monthly rate in 14 months.
Some 34 percent of investors believe the biggest market risks lie in politics, citing North Korea’s nuclear standoff, while 21 percent mention a policy mis-step by the U.S. Federal reserve or the European Central Bank and 15 percent Chinese credit tightening.
After four consecutive months where buying into the tech-heavy Nasdaq index was seen as the most “crowded” trade, investing in Bitcoin was now perceived by global asset managers as the most popular investment.
The cryptocurrency reached an all-time of 4,979 dollars on Sept. 2 before reports said the Chinese government was considering shutting down local exchanges.
Reporting by Julien Ponthus; editing by John Stonestreet