Are investors turning bearish on US stocks? BofA flags outflows By Investing.com

Bank of America said global long-only funds sold $15.4 billion of U.S. equities in March while buying $16.7 billion in Europe and $9.8 billion in Japan, extending a broader rotation away from the U.S. Year-to-date U.S. outflows have reached $131 billion, with active funds most overweight Europe and most underweight the U.S. The most bought sector was Healthcare, while Software and Diversified Financials saw the heaviest selling; AI themes continued to see the largest outflows at -$93.3 billion over 12 months.

Analysis

The flow picture is less about “sell America” in the abstract and more about a narrow de-risking of the most crowded U.S. factor exposures into a regime that rewards earnings visibility and balance-sheet durability. That means the first-order beneficiaries are not just overseas indices, but U.S. multinationals with non-U.S. revenue exposure and lower duration risk: healthcare, energy, and select industrials can keep attracting capital even if domestic active managers remain underweight the U.S. The biggest losers are the long-duration, narrative-heavy parts of tech where ownership is already rich and incremental buyers are thinning; when passive keeps supporting the tape but active is net selling, price action can stay fragile until a catalyst forces re-acceleration in revisions.

The second-order effect is that this is likely to broaden leadership inside equities rather than trigger a clean regional unwind. If global allocators are rotating into Europe, Japan, and EM, U.S.-listed firms with supply-chain leverage to those markets — notably semis and industrial automation — can still work, but only where earnings revisions offset crowding risk. That makes AVGO, TSM, and ASML more resilient than the megacap index weightings implied by the broader U.S. selloff, while MSFT, NVDA, and META remain vulnerable to multiple compression if AI spend fails to translate into near-term monetization.

The market may be underappreciating how long this can persist: active reallocations tend to last months, not days, because they reflect process changes in PM positioning rather than one-off macro shocks. A reversal likely needs either a sharp U.S. growth reacceleration, a decline in USD strength that removes the foreign-asset tailwind, or a broad tech earnings beat that forces underowned U.S. exposure back on. Until then, the more actionable trade is to own the strongest balance-sheet/value and cash-flow names while fading the most crowded software/AI exposures on rallies.

Key Decisions for Investors

• Go long XOM and JNJ versus short NVDA on a 1-3 month horizon: the pair captures the rotation from long-duration growth into cash-flow defensives; target 8-12% relative outperformance if flows continue, with risk centered on a renewed AI-led growth breakout.
• Long AVGO / TSM vs short MSFT / META into earnings season: semis with direct AI capex linkage should hold better than the broad AI platform complex if investors keep trimming U.S. mega-cap exposure; use a 6-8 week holding period and take profits if NVDA/MSFT start to re-accelerate on guidance.
• Buy AZN or JNJ on pullbacks as a defensive rotation expression: healthcare is the cleanest recipient of active reallocations, and the trade works even if U.S. equities stay rangebound; risk/reward is attractive over 2-4 months because ownership is still not saturated.
• Fade COIN, BX, DDOG, and JD on rallies; these names sit in the weak-momentum/low-ownership bucket and should underperform if active de-risking persists. Best implemented as a basket short with a 4-8 week horizon and tight stops if breadth improves sharply.
• If you want a higher-conviction macro hedge, short a U.S. tech-heavy ETF against long Europe/Japan exposure for 1-2 quarters: the thesis is that global PMs are still reallocating away from U.S. duration risk, and the pair should benefit from relative flow persistence.