Fund Managers Shift Toward International Equities as Recession Fears Recede
Summary
Fund Managers Shift Toward International Equities as Recession Fears Recede
A growing number of global fund managers are turning bullish on international equities, expecting them to outperform all other asset classes over the next five years, according to Bank of America’s June Global Fund Manager Survey.
The survey, which polled 190 managers overseeing $523 billion, revealed a clear trend:
54% expect international stocks to lead
Only 23% prefer U.S. equities, while
13% chose gold and
A mere 5% backed bonds
This represents a sharp rotation in sentiment as recession expectations ease and the narrative around a global soft landing gains traction.
Key Takeaways from the Survey
- Recession Outlook Reverses
In April, a net 42% expected a recession.
By June, that had flipped to a net 36% saying a recession is unlikely.
Confidence in a “soft landing” now stands at 66%, an eight-month high.
- U.S. Assets Out of Favor
Fund managers are most underweight the U.S. dollar in 20 years.
Allocations to U.S. equities remain below historical averages, while interest in eurozone and emerging market stocks has picked up.
- Sectoral Rotations
Portfolios have shifted towards equities, EMs, energy, and banks.
Managers are trimming defensive sectors like utilities, healthcare, and staples.
Use These Tools to Track the Trends:
Historical S&P 500 Constituents: Analyze shifting U.S. equity exposures and stock-level changes
Individual Industry Classification: Monitor sector allocations globally and in emerging markets
Crowded Trades and Policy Doubts “Long gold” remains the most crowded trade for the third straight month, according to 41% of fund managers. Meanwhile, enthusiasm for the “Magnificent 7” tech stocks has diminished, cited by only 23%.
On the policy front, fund managers are skeptical about the proposed U.S. tax cuts under the so-called “Big Beautiful Bill.”
While 33% see growth upside in 2025,
81% believe it will widen the U.S. budget deficit, raising fiscal risk concerns.
What This Means for Investors The rotation into international equities and risk-on sectors like energy and EMs reflects a cautiously optimistic view of the global economy. However, caution persists—geopolitical tensions and the risk of trade wars are still top-of-mind, even if less dominant than earlier this year.
As investor positioning shifts, those tracking global allocations should pay close attention to fund flow data and cross-border sector trends to stay ahead of evolving market sentiment.