US equity allocations see record monthly jump

US equities North America Bank of America China

14 September 2023
| By Laura Dew |
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Bank of America’s (BoA) global survey found allocations to US stocks have seen a record jump as investors switch their equity weightings.

The monthly survey, which questioned 258 panellists with US$678 billion in assets under management between 1 and 7 September, found a spike in US equity allocations.

Allocations to US equities saw a “record jump” during September, rising 29 percentage points over the month from a net underweight allocation of 22 per cent to a net overweight allocation of 7 per cent. 

This is the first time investors have been overweight to the region since August 2022, over a year ago, and the largest ever monthly increase in allocations.

Over the past six months to 12 September, S&P 500 returned 15.7 per cent while NASDAQ was up by 8 per cent over the same period.

The move to US equities was preceded by investors moving away from emerging market equities, with EM equity allocations falling from a net 34 per cent overweight to a smaller net 9 per cent overweight.  

BoA suggested the move away from emerging markets was prompted by a slump in the optimism of China’s growth, following the reopening from COVID-19 lockdowns. Growth expectations are back to “lockdown lows” with zero respondents expecting to see a stronger economy in China, down from more than three-quarters at the time of the reopening.

The firm said expectations in September are now even lower than when China was in lockdown a year ago.

The Chinese Shanghai Composite Index was down 4 per cent over the past six months.

Cash weightings were 4.9 per cent, slightly up from 4.8 per cent in August, which was its lowest weighting since November 2021. However, BoA acknowledged they were well below the peak of 6.3 per cent levels seen in October 2022.

Fund manager sentiment, which is based on the combination of fund managers’ cash position, equity allocation and economic growth expectations, fell slightly, indicating respondents are “still bearish, albeit no longer extreme bears”.

As well as US equities, fund managers rotated into industrials and REITs and out of telecoms and technology stocks, bonds and UK equities. 
 

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