Fund managers made a record jump into U.S. equities in September and out of emerging markets as the risks to the global economy heighten, according to
Bank of America
‘s monthly survey Tuesday.
BofA investment strategist Michael Hartnett wrote in a research note Tuesday that there was a “dramatic sift” to U.S. equities and a record drop in emerging markets “as China growth optimism slumps back to lockdown lows.” This was according to a survey conducted between Sept. 1 and Sept. 7 that included 222 participants with $616 billion assets under management.
The allocation to U.S. equities gained 29 percentage points in September while the allocation to emerging markets dropped 25 percentage points, the survey showed.
This can be seen in the large jump of U.S. stocks this year. The
S&P 500
has surged 17% in 2023 while the Vanguard
FTSE Emerging Markets ETF
has gained 3.2%.
Meanwhile, the tech-heavy
Nasdaq Composite
has jumped 33% as investors have taken bets on the future of artificial intelligence. Hartnett added in his research that the most crowded trades in September have been long big tech and short China Equities.
The world’s second largest economy has hit a rough patch following years of tight Covid-19 lockdowns, amid a troubled property market and an overall slowdown in the China’s services sector. This has concerned traders and fund managers, leading them to put their investments into U.S. equities more than ever before.
However, recent Chinese inflation data this week came in better than expected. It’s possible that with a heavily crowded U.S. equity market, fund managers may take any positive catalysts abroad as encouragement to increase their positions in global markets moving forward.
But for now, Hartnett noted that the fund manager consensus is that the global economy gets weaker over the next 12 months. He added that China growth optimism this month is currently lower than in September 2022, which was before the country reopened from its pandemic shutdowns.
Write to Angela Palumbo at [email protected]
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