Even though Europe’s economic fortunes are once again on the wane while US growth has gained momentum, Belgian fund selectors have an obvious preference for the former.
An overwhelming 75% of interviewees said they want to increase their allocation to European equities, while only 8% said they plan to cut exposure. This is a remarkable bounce-back from September, when appetite had decreased markedly. Back in September, fund selectors said they were unsure of the directions the markets were going to take. While October’s market correction was a sign for asset management companies to downgrade their expectations for European equities, Belgian fund selectors clearly see it as a buying opportunity, supported by accommodative ECB policy action.
Avoiding the bubble
US equity sentiment has moved in exactly the opposite direction. It wasn’t particularly bullish a few months ago, but buyers and sellers were at least balancing each other out. This time around, only 8% of interviewees said they will increase allocation to the asset class, while an overwhelming 42% said they would cut exposure. This is the second highest share of bears ever recorded in Europe for the asset class. Already a year ago, fund selectors told our researchers about their feeling that many US-listed companies were overvalued.
Since then, the S&P 500 has gained another 29% in Euro terms, so Belgium’s fund buyers are happy to take their profits. “The only reason to invest in the US at the moment is the US dollar. I’m very negative about American stocks,” says Tim Peeters, a fund selector for Portolani in Belgium. “On the contrary, I am positive about European stocks which stand to profit from a weaker Euro.”
