Investor enthusiasm for U.S. equities has surged to an all-time high, according to a recent survey by Bank of America (BofA) Global Research. The December survey, which polled 171 investors managing $420 billion in assets, shows a significant shift away from cash, commodities, and European stocks in favor of U.S. markets.
Driving Factors Behind the Shift
The allocation boost to U.S. equities stems from growing optimism about the country’s economic outlook. Key factors influencing this trend include:
- Economic Confidence: Strong expectations for U.S. economic growth.
- Policy Anticipations: Investors are betting on potential tax cuts and deregulation under Donald Trump’s second term as president.
- Federal Reserve Rate Cuts: The anticipation of further rate reductions by the Federal Reserve adds to the appeal of U.S. equities.
Cash and Commodities Decline to Multi-Year Lows
- Cash Allocations: Investor holdings in cash have fallen to their lowest levels since April 2001, signaling a shift toward riskier assets.
- Commodities: Allocations are now at their lowest since June 2017, reflecting reduced interest in raw materials investments.
European Equities See Significant Declines
The survey also highlights a record underweight in European equities, with the biggest divergence in favor of U.S. equities relative to the eurozone since June 2012, during the eurozone sovereign debt crisis.
Broader Market Impact
As investors heavily favor U.S. equities, the trend underscores confidence in the U.S. economic environment while putting pressure on less-preferred asset classes and regions. The strategic reallocation reflects both fiscal and monetary policy expectations, positioning U.S. markets as a key destination for growth-focused investments.