Global fund managers said the euro was cheap and they were seeking more exposure to it and European equities on the back of a massive fiscal stimulus plan, a Bank of America survey showed on Tuesday.
Among factors boosting European assets is Europe’s relative success in gradually reopening its economy and the European Union’s proposed 750 billion euro recovery fund to help countries deal with the fallout from the coronavirus crisis.
Investors’ allocation to euro zone equities increased 9 percentage point to net 16% overweight, the largest increase in net weighting of any region this month. A net 44% of the 210 investors surveyed between Jun 2-9 said the euro was cheap.
The survey also showed a rush to the resilient U.S. technology stocks was gathering more pace in July with a record 74% of investors calling it the most “crowded trade”.
The Nasdaq index .NDAX, home to the world’s largest tech stocks, has been setting record highs even as COVID-19 has been spreading fast in the United States.
Though risk assets had been rising since the record selloff in March, “sentiment remains cautious” with cash levels rising to 4.9% from 4.7%, BofA added.
“Wall Street’s $24 trillion rally yet to elicit ‘greed’.”
The bank said it expects stock markets to remain choppy during summer, recommeding selling when the S&P 500 .SPX goes above 3,250 points and buying when it falls below 2,950.
Investors saw a coronavirus second wave as the biggest “tail risk” for the fourth month running with just 14% of them expecting a “V”-shaped economic recovery versus 44% expecting a “U”, and 30% a “W”.
A V-shaped recovery is when a plunge in growth is followed by an equally sharp recovery; U-shaped is when recovery takes more than a couple of quarters; and W-shaped refers to a double-dip in growth.