The survey reveals that UK equities are now the third most favoured sector, trailing only utilities and banks. This marks a sharp reversal from just a month prior, when the UK was the least attractive market, with an 18% underweight. Investors are now 4% overweight, the second time since 2022 this positive shift has occurred.

This resurgence coincides with increased investment in Eurozone stocks, which are at their highest allocation since July 2021. Conversely, US equity allocation experienced a record drop in March, driven by concerns over potential trade wars stemming from President Trump’s tariff policies. This, coupled with a significant decline in global growth expectations and a surge in cash allocations, reflects growing economic uncertainty.

Currently, 63% of fund managers anticipate a weakened global economy within the next year. While this decline is substantial, it remains far from the extreme lows seen during the pandemic or the Silicon Valley Bank collapse. Growth expectations and equity allocations have normalised, moving away from the “uber-bull level” observed after Trump’s victory.

BofA analysts suggest that a majority of investors now foresee a stagflationary environment, with Trump’s policies expected to negatively impact growth and positively impact inflation. Cash allocations have risen from 3.5% to 4.1%, primarily due to recessionary trade war fears. Notably, 69% of investors believe the “US exceptionalism” market theme has peaked.