Here's what firms managing $20 trillion are actually doing. And they're not buying U.S. stocks.

Citigroup strategists, analyzing the views of asset allocation managers overseeing $20 trillion, report a growing "Sell America" trade, with U.S. equities downgraded to neutral and becoming the least preferred equity market. Europe and Japan are now favored, while consensus long trades include the euro, precious metals, and the yen; short positions are focused on Japanese government bonds, oil, and the U.S. dollar, indicating a divergence from retail investor behavior.

Analysis

A Citigroup report, synthesizing the views of 15 prominent asset allocation managers responsible for over $20 trillion in assets, reveals a growing institutional preference for a 'Sell America' strategy. U.S. equities have been consequently downgraded to a neutral position and are now designated as the least preferred equity market among this influential group. In contrast, European and Japanese equity markets have received upgrades, positioning them as the 'most preferred in equity-land.' The consensus among these managers also points to bullish positions on the euro, precious metals, U.S. real rates, and the yen. Conversely, bearish sentiment is concentrated on Japanese government bonds, oil, the U.S. dollar, the Swiss franc, and U.S. bonds. Notably, the report highlights unanimous agreement among managers for shorting the U.S. dollar and establishing long positions in the euro. While there is considerable disagreement regarding U.S. stocks specifically—with five surveyed active managers bullish and five bearish—the broader institutional trend contrasts sharply with retail investor behavior. JPMorgan data indicates retail investors aggressively bought approximately $50 billion in U.S. stocks from April 8, while institutional investors were net sellers, signaling a significant divergence in market participation and sentiment.

Key Decisions for Investors

• Re-evaluate U.S. equity allocations considering the pronounced institutional shift towards European and Japanese markets and the downgrade of U.S. equities to 'least preferred' status.
• Consider positioning for potential U.S. dollar weakness and euro strength, reflecting the unanimous consensus reported among major asset managers on these currency pairs.
• Monitor the divergence between institutional selling and strong retail buying in U.S. equities, as this could signal increased market volatility or tactical opportunities, and note the divided conviction on U.S. stocks among active institutional managers.
• Assess opportunities aligned with strong institutional consensus, such as potential short positions in oil and U.S. bonds, or long positions in precious metals and the yen.