Investors shedding equities at 2008 levels

Investors shedding equities at 2008 levels
Asset allocators cut their holdings of U.S. equities this month to levels not seen since 2008 amid concern that the world's largest economy may be weakening, a BofA Merrill Lynch Global Research survey showed.
AUG 24, 2010
Asset allocators cut their holdings of U.S. equities this month to levels not seen since 2008 amid concern that the world's largest economy may be weakening, a BofA Merrill Lynch Global Research survey showed. A net 14 percent of respondents, who together manage about $513 billion, were “underweight” American stocks, compared with 7 percent who were “overweight” in July. Investors instead favored shares in emerging markets, Europe and the U.K. The benchmark Standard & Poor's 500 Index last week slumped 3.8 percent, the biggest drop in more than a month, after the Federal Reserve said the pace of economic recovery will probably be “more modest” than forecast. Globally, about $1.9 trillion has been wiped off the value of equities since the Fed's Aug. 10 statement. “Clearly the U.S. has become the focus point of global growth worries,” Patrik Schowitz, a European equity strategist at BofA Merrill Lynch, said at press briefing in London today. “Instead, emerging markets have become the default long-term growth story.” Just 5 percent of survey respondents expect stronger global growth in the next 12 months, compared with 42 percent three months ago. Even so, 78 percent do not expect another recession. “The spotlight of investor pessimism has shifted away from China and Europe to Japan and the U.S.,” said Michael Hartnett, BofA Merrill Lynch's New York-based chief global equity strategist. “Investors clearly remain cautious, so better news on U.S. growth and fiscal policy would be a pleasant surprise.” Emerging Markets Investors raised their holdings in emerging markets with a net 38 percent now overweight the region, up from 34 percent in July. The outlook for European stocks also improved as concern about the region's sovereign debt eased. Asset allocators are now overweight the region for the first time since November. U.K. equities also joined the “newfound European popularity,” according to the report. A net 2 percent are now underweight, the most positive reading on Britain since May 2007. That compares to 15 percent in July. Japan replaced the U.K. as the least favored region by investors with a net 27 percent underweight, the survey showed. That corresponds with investors' view on the yen, which 62 percent of respondents said is overvalued. As of January last year, Merrill Lynch changed the format of its survey and no longer publishes full historical data. A total of 187 fund managers participated in this month's survey, which was conducted between Aug. 6 and Aug. 12.

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