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Fund selectors buy Europe ditch US

The ECBs QE announcement combined with accelerating economic growth in the eurozone has propelled European equity sentiment to a record high. At the same time, appetite for US equities among Europes fund buyers is at an all-time low.

The latest EIE data show a remarkable resemblance with the freshest Morningstar fund flow figures. These show an acceleration of US equity selling this year, while European equities net flows are edging up sharply.

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Almost two third of Europe’s fund selectors are now intending to increase their allocation to European equities in the next 12 months, breaking the previous all-time record dating from Q1 2014. In all but three countries EIE gather data from, the majority of fund selectors plan to step up their exposure to the asset class. The French and Spanish are the most enthusiastic: more than 80% will buy more European equities. This could be due to the relatively high perceived return prospects for the local equity markets in these two countries.

Attitude gap

Whereas European equity sentiment is climbing into the clouds, for US equities it is going down the drain:  More than a third of Europe’s fund buyers will sell part of their US equity holdings in the coming year, while just one in 10 is planning an increase. To illustrate the enormous gap in attitude towards the two asset classes: while the majority of fund buyers want to step up their allocation to European equities in all but three countries, US equity sentiment is net negative (more sellers than buyers) in every European country except Luxembourg, Belgium and Finland.

Swedish switch

The gap is widest in Spain. They are not only momentarily the biggest European equity fans, they are also the strongest sellers of US stocks. Noteworthy is the change of tack of Sweden’s fund selectors, traditionally strong buyers of US equities. Until very recently, they were the only European country with still lots of US equity fans, but this has changed. Now it harbours the highest percentage of sellers after Spain.

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