Political ‘Angst’ Turns Fund Managers Against U.K., U.S. Stocks

Updated on
  • Investors cut allocations to 2008 low: Bank of America survey
  • Risks cited include central banks, bond crash, North Korea

State Street's Lacaille Says Market Fear Can Return

“Anglo-Saxon political angst” is spurring a shift in investment from U.S. and British equities to Europe, according to the latest survey of fund managers by Bank of America Merrill Lynch.

Money managers of $587 billion polled from Aug. 4 to 10 cut allocations to the two nations to a post-financial crisis low, while boosting positions in European shares. They cite the risk of policy blunders by major central banks as their foremost concerns, followed by a bond crash and escalating tensions with North Korea. Cash holdings remained “stubbornly high” at 4.9 percent, according to the report published Tuesday.

The latest war of words between U.S. President Donald Trump and his North Korean counterpart over nuclear weapons has sapped appetite for American equities. Meanwhile, frayed confidence in the ability of U.K. Prime Minister Theresa May to negotiate Brexit has impacted the nation’s shares. U.S. stock funds suffered an eighth-straight week of redemptions in the period ending Aug. 11, which turned year-to-date flows negative.

Here are three charts showing investors’ distaste for the U.S. and U.K. and preference for Europe.

Exposure to U.S. stocks falls to 22 percent underweight, from 20 percent last month.

Funds now 37 percent underweight U.K. stocks versus 30 percent.

Overweight allocations to euro zone stocks jump to 56 percent from 54 percent.

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