Investors are dumping US stocks at the fastest pace for at least 25 years as they switch money out of Donald Trump’s America and into Britain and Europe.
With the President’s trade wars fuelling fears of a recession, Bank of America’s monthly survey of fund managers found the ‘biggest drop in US equity allocation’ since comparable records began in 1999.
The report came as the pound topped $1.30 for the first time this year, rising to a four-and-a-half month high, while the euro touched $1.0954.
Trevor Greetham, head of multi-asset at Royal London Asset Management, added: ‘It’s not surprising to see fund managers moving away from the US market. It’s priced for perfection and the policy coming out of the White House ain’t that.’
Bank of America found fund managers in a febrile mood, with concerns about the outlook for the economy resulting in the ‘second biggest drop in global growth expectations ever’.
The report added: ‘The rise in global economic growth pessimism was driven by a worsening outlook for the US economy. Conversely, Chinese economic growth outlook brightened.’
Dollar dumped: The pound topped $1.30 for the first time this year, rising to a four-and-a-half month high of $1.3004 before easing, while the euro touched $1.0954
Anxiety about ‘stagflation’ and trade wars as well as the ‘end of US exceptionalism’ has driven a ‘bull crash’ in sentiment, the survey found, as the optimism that initially surrounded Trump’s return to the White House evaporates.
Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown, said ‘the Trump bump has turned into a slump’.
While investors are dumping US stocks, Bank of America found the biggest jump in cash holdings since the onset of Covid-19 in March 2020.
British stocks are now more in favour with fund managers than at any time since June 2021 while the allocation to eurozone equities is the highest since July 2021. Banks are the world’s favourite sector, the report noted.
‘At the beginning of the year investors were all raging bulls, but they are ending the winter as bears,’ said Elyas Galou, senior investment strategist at Bank of America. ‘What has changed is that everyone was bullish on the US and this has faded significantly.’
Having risen sharply after Trump’s election victory in November, US stocks have fallen back in recent weeks with the major Wall Street benchmarks lagging behind European rivals.
The tech-heavy Nasdaq is down more than 9 per cent so far this year while the S&P 500 has fallen more than 4 per cent and the Dow Jones Industrial Average nearly 2 per cent.
By contrast, the FTSE 100 is up 5.4 per cent in London, the Cac 40 has risen nearly 10 per cent in Paris and the Dax has soared almost 17 per cent in Frankfurt.
Sentiment in Europe has been boosted by German plans to tear up stringent debt rules to free up cash for a massive rearmament programme and upgrade the country’s infrastructure – boosting the ailing economy in the process.
Hopes of a revival in Europe’s largest economy has pushed the euro higher in recent weeks.
The currency now stands at its strongest against the dollar since early October.
Streeter at Hargreaves Lansdown said: ‘Investors are clearly bracing for fresh volatility ahead and adjusting their portfolios to deal with the uncertainty.’
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