LONDON (Reuters) – Investors are overweight U.S. equities for the first time in 15 months, Bank of America Merrill Lynch’s latest monthly survey of funds showed on Tuesday, with the United States seen as the only region with a favorable profits outlook.
BAML’s June survey revealed that allocation to U.S. stocks rose 16 percentage points over the month to a net one percent overweight, while 64 percent of respondents thought U.S. firms had the most favorable outlook for profits, the highest level in 17 years.
Regions - Profit - Outlooks
All other regions were seen having negative profit outlooks.
That rise in allocation came even though so-called FAANG and BAT technology shares were identified as the most “crowded” trade for the fifth month in a row. The others in the top three crowded trades were short U.S. Treasuries and long U.S. dollar.
Investors - Eyes - US - Month - Record
“Investors have their eyes on the U.S. this month with a record high favorable outlook for profits and a return to U.S. equity allocation,” Michael Hartnett, BAML’s chief investment strategist told clients.
The survey found that the most commonly cited tail risk for markets was trade wars, identified by 31 percent of respondents, while 26 percent cited a hawkish policy mistake by the U.S. Federal Reserve or the European Central Bank.
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