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Asset managers shrug off pessimism on US equities

Fund manager sentiment towards US equities had been negative for much of this year, with most asset management companies expecting a negative return over the next 12 months. But their outlook has brightened in October. Fund selectors have also started to be more constructive about the asset class.


PA Europe

Fund manager sentiment towards US stocks is now again positive, which means more asset management companies expect a positive return than a negative one. There is no evidence that their swing in mood was triggered by October’s market rally, but there are no indications to the contrary either. Sentiment is now at its highest since February, when the S&P 500 was also rallying, before moving into negative territory the following month, together with the fund manager sentiment…

That said, the change in US equity sentiment is significant as it ends the longest pessimism streak ever, which lasted 7 months. Even during the financial crisis, fund manager sentiment hadn’t been consistently negative for that long. 

The brightening fund manager outlook is reflected in the attitudes of fund selectors. Eight months ago, those planning to decrease exposure to US equities were three times as numerous as those intending to buy more of it. Now, the two figures are almost evenly matched, while the vast majority of Europe’s fund buyers plan to keep their overall allocation to the asset class unchanged over the next 12 months.

It remains to be seen, however, whether the cautious upward trend will continue. Fund flows from European investors have been capricious over the past months. While European equities saw net inflows of almost €6bn in August and September combined, US stocks suffered net outflows of €3.2bn over that period.

Joachim Klement, chief investment officer of Swiss investment consultancy Wellershoff & Partners, remain very sceptical about the asset class. “We are underweight US equities and once the Fed starts hiking we will be on code orange for a further downgrade,” he told Expert Investor Europe. “None of our clients has told us they consider to increase their positions in the asset class lately.”  

Click here to see a full overview of the latest Fund Manager Sentiment for a range of asset classes.