Global investors are increasingly turning their backs on US stocks and the dollar, shifting their focus toward eurozone equities and emerging markets, according to the latest Bank of America (BoA) fund manager survey.
The closely watched monthly poll of 190 institutional investors overseeing a combined $523 billion in assets reveals a decisive rotation away from American assets following the turbulence caused by President Trump’s renewed trade tariff threats in April. While global confidence has largely recovered from the initial shock, sentiment toward the US remains muted — with dollar holdings now at their lowest levels in two decades and allocations to American equities sharply reduced.
A net 35 per cent of respondents said they were underweight in US stocks, the highest level of scepticism toward American equities in recent memory. By contrast, the eurozone has emerged as a key beneficiary of the shift, with a net 35 per cent overweight in continental European shares. Meanwhile, emerging markets are also attracting strong inflows as risk appetite gradually returns.
The survey, conducted between 6 and 12 June, captures a moment of cautious optimism. It followed a partial easing of US-China trade tensions, though before the recent flare-up in Middle East hostilities. The average investor cash balance dropped from 4.8 per cent in April to 4.2 per cent in June — a signal that many fund managers are moving back into risk assets and away from the safety of cash.
BoA’s analysts describe the post-April rally as driven by what they dubbed the “Taco trade” — a cynical nod to investors’ belief that “Trump Always Chickens Out” after making initial aggressive threats. Markets have responded with gusto. Since the low point on April 8, the S&P 500 has surged 20.6 per cent, while the FTSE 100 and Stoxx Europe 600 have also gained 15 per cent and 15.4 per cent, respectively.
Despite the broader recovery, UK equities remain out of favour, with only a modest improvement in sentiment. The survey shows a net 4 per cent of global investors are still underweight UK stocks, though that figure is less negative than much of the past 25 years. “People are clearly getting less pessimistic about the UK, but it is still missing out on the surge of confidence seen for the rest of Europe,” said Andreas Bruckner, European equity strategist at BoA.
Perhaps the most striking data point in the survey is the scale of the shift away from the US dollar. BoA found that investors are now the most underweight on the greenback in two decades, a sign of mounting concerns about US macroeconomic risks and long-term competitiveness. The dollar’s role as a global reserve currency remains unchallenged for now, but the figures suggest its reputational appeal is weakening among institutional capital allocators.
That sentiment is echoed in longer-term expectations. When asked which asset class or geography would deliver the best returns over the next five years, 54 per cent chose non-US equities, while just 23 per cent backed US stocks. Gold came in third, at 13 per cent, suggesting some residual caution remains baked into portfolios.
One of the most encouraging findings is the sharp turnaround in economic sentiment. Back in April, 42 per cent of investors polled thought a global recession was likely. That figure has now swung to a net 36 per cent who think a recession is unlikely — a remarkable reversal in just two months.
Still, recession remains the top “tail risk”, cited by 47 per cent of respondents. Other perceived threats include a resurgence of inflation leading to higher US interest rates (17 per cent), a bond market crash (16 per cent), and a potential dollar crash (11 per cent) caused by international buyers abandoning US assets.
BoA’s findings add to growing evidence that investors are hedging against American economic volatility by diversifying into alternative markets — particularly those in Europe and Asia that appear to be benefiting from relatively more stable policy environments.
The challenge for the US now lies in restoring confidence amid ongoing geopolitical tensions and domestic fiscal pressures. With President Trump’s trade rhetoric continuing to cast a long shadow over market sentiment, investors appear more inclined to seek opportunities beyond US borders — even as stock indices near all-time highs.
Whether this rotation proves to be a temporary correction or the beginning of a more structural shift in global capital flows remains to be seen. But for now, the message from institutional investors is clear: the era of unchallenged US exceptionalism is on pause — if not under full review.
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Global investors ‘turning away from US stocks and dollar’ amid Trump-era market unease