Asset allocation in U.S. equities more than halved in July to a nine-month low as investors sold technology companies amid concern about the outlook for global growth, a Bank of America Corp. (BAC:US) survey showed.
A net 14 percent of respondents, who together manage $567 billion, said they were overweight U.S. stocks, meaning they owned more than represented in global benchmarks. That’s down from 31 percent last month. Holdings in technology companies were reduced to a seven-month low, with 32 percent now overweight the industry versus 41 percent in June.
“Investor sentiment deteriorated further despite a rally in equities and commodities since the June survey,” wrote BofA strategists Michael Hartnett and Gary Baker in the report to clients dated today. “Pessimism was sharpened by a big drop in corporate-profit expectations and fading hopes for quantitative easing in the third quarter.”
The Standard & Poor’s 500 Index (SPX) has climbed 5.9 percent since June 1, rebounding from two months of declines, as central banks around the world announced stimulus measures to support economic growth. The Standard & Poor’s GSCI gauge of 24 commodities has rallied 13 percent from its 2012 low on June 21.
Even so, asset allocators remained “significantly” underweight in equities and overweight cash in July as growth expectations for global growth fell for a second month. Money managers also reduced their holdings in commodities to the lowest level since February 2009 with 25 percent of respondents now anticipating a global recession.
The outlook for corporate earnings also slumped in July, with 38 percent expecting lower profit growth compared to 19 percent in June.
Emerging-market stocks were the most favored amongst respondents, with 19 percent overweight the group, while investors remained underweight in the euro area.
BofA conducted the global survey from July 6 to July 12 which included 190 respondents.
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