US Stock Market’s Outperformance Is Over, BofA Survey Shows

A Bank of America fund manager survey indicates a shift in investor sentiment, with 54% of asset managers predicting international stocks will outperform US equities over the next five years; only 23% believe US stocks will be the top asset class. This suggests a growing consensus that the US stock market's period of dominance is nearing its end, potentially driving capital flows towards international markets.

Analysis

A recent Bank of America Corp. fund manager survey indicates a significant shift in investor expectations, with 54% of surveyed asset managers anticipating international stocks will outperform US equities over the next five years. This contrasts sharply with only 23% who believe US stocks will maintain their top position, suggesting a growing consensus that the era of US market dominance may be concluding. The survey further reveals that a minority of managers expect gold (13%) or bonds (5%) to deliver top returns, highlighting a clear preference for equities, albeit with a geographical pivot. The overall sentiment derived from this news is moderately negative towards US equities, carrying a bearish tone and a market impact score of 0.55, indicating this shift in sentiment is noteworthy for market participants and could presage reallocations of capital away from US markets.

Key Decisions for Investors

• Investors should re-evaluate their portfolio's geographic asset allocation, potentially increasing exposure to international equities given the survey's strong preference for them over US stocks for the next five years.
• Monitoring capital flow data and relative performance metrics between US and international markets is advised to identify early confirmations of this anticipated shift in market leadership.
• Given the bearish sentiment on US equities highlighted by the survey, a review of current US equity exposure is warranted, with consideration for diversification into non-US markets.
• The survey's notably low expectations for gold and bonds as top-performing assets suggest a need to critically assess allocations to these asset classes if held primarily for outperformance.