Record Decline in U.S. Stock Holdings Signals Investor Caution
Global investors have drastically reduced their U.S. stock holdings in recent months, with a record number of fund managers signaling continued reductions. According to a report by BofA Global Research, a net 36% of investors were underweight in U.S. equities, marking the largest drop in nearly two years.
Concerns Over Trade War and Global Recession Risks
The survey, which included responses from 164 investors managing $386 billion in assets, revealed that a majority of respondents view the potential trade war between the U.S. and other global economies as the greatest risk for market stability. The aggressive tariff strategies initiated by U.S. President Donald Trump have caused a selloff in U.S. stocks, bonds, and the dollar, heightening uncertainty.
Investor Sentiment and the Fear of a Global Recession
Investor sentiment has turned increasingly negative, with 42% of respondents predicting a global recession, the highest level recorded since June 2023. This fear of a global slowdown has prompted widespread caution, especially regarding U.S. assets.
Shift in Market Focus: Long Gold Outpaces U.S. Tech Bets
In a sign of shifting priorities, 49% of investors believe that the crowded market trade has now moved towards “long gold” positions, marking the first time in two years that bets on U.S. technology stocks have been displaced. Additionally, 73% of respondents stated that the notion of “U.S. exceptionalism” has peaked, further dampening optimism about the U.S. economy.
U.S. Dollar Outlook and Continued Global Weakness
The outlook for the U.S. dollar remains bleak, with 61% of investors expecting the currency to depreciate over the next year. The dollar has already experienced sharp declines against other major currencies, including the euro, Japanese yen, and Swiss franc.
