Asset managers and institutional investors surveyed by Bank of America suggested overwhelmingly that international stocks will be the best-performing asset over the next five years. The bank’s monthly Global Fund Survey, conducted from June 6 through 12, polled 190 investors who collectively manage $523 billion.
Approximately 54% of the responding investors reported they expect international stocks to be the best-performing asset class, while only 23% of those surveyed said U.S. stocks will be the best performers. Thirteen percent of respondents said gold would be the best-performing asset, while 3% said corporate bonds and 2% said government bonds.
Month over month, investors rotated the most into emerging markets, equities and the energy sector, while rotating the most out of the euro, the utilities sector and cash.
According to the survey, investors in June were most overweight in their positioning to the eurozone, emerging markets and banks, while being most underweight U.S. equities, the dollar and the energy sector.
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According to the survey, investors cited in the bank’s Fund Managers Survey are the most underweight they have been to the dollar in 20 years.
Relative to the average long-term position over the last 20 years, investors are most overweight the Euro, bonds and the utilities sector, while they are most underweight the U.S. dollar, bonds and utilities.
The survey also found that investor sentiment is recovering to pre-“liberation day” levels, as trade war and recession fears decline.
Despite a rebound in equity markets from lows following President Donald Trump’s tariff announcements in April, U.S. equities—driven by a technology- and artificial intelligence-fueled rally—are still underperforming their global counterparts. The S&P 500 has returned 1.95% year-to-date, while the STOXX Europe 600 and the iShares MSCI China Index have returned 1.94% and 17.83%, respectively, during the same period. The iShares MSCI Japan Index has returned 10.16%, and the iShares MSCI Emerging Markets index has returned 13.15%. Weaker U.S. equities have led investors to search globally for diversification.
“We do think there are going to be pockets of opportunities outside of the U.S. to diversify more geographically,” says Mao Dong, co-head of portfolio management and head of portfolio research at PGIM Multi-Asset Solutions.
Some of the opportunities identified by PGIM include European equities, specifically European defense companies, as well as European credit in the securitized market, along with investing in Japan.
“Valuations are very attractive for European equities; we can see pretty low expectations priced into these stocks, even after a significant rally this year,” says Kristina Hooper, chief market strategist at Man Group.
PGIM’s Dong suggests the market climate should prompt investors to consider opportunities globally.
“I’d say the U.S. will continue to be a dominant driver of returns globally, but it doesn’t mean that we can’t look to diversify away a bit from that and into these areas of opportunities,” Dong says.
Of the 190 survey respondents, 62 were institutional investors, 78 were mutual funds, 17 were hedge funds and 33 were other types of investors.
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Tags: Bank of America, Equities, Kristina Hooper, Man Group, Mao Dong, PGIM
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