Investors are shying away from U.S. equities at the highest rate since the beginning of the financial crisis amid fears that the U.S. central bank will start raising short-term interest rates in the coming months.
A net 19 percent of global asset allocators are now underweight U.S. equities, the highest share since January 2008 and up from 6 percent overweight in February, according to a Bank of America Merrill Lynch Fund Manager survey for March.
The share of investors saying U.S. equities are overvalued has risen to 23 percent, the highest since May 2000. And 35 percent say the U.S. is the region they’d like to underweight the most, the highest reading in almost a decade.
The Federal Reserve will release a statement and economic projections Wednesday afternoon after it wraps up its two-day policy meeting in Washington. Many economists expect the central bank to tweak the language describing the timing of raising interest rates, which it’s held near zero since 2008 in an attempt to spur economic growth.
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The portion of investors expecting the Federal Reserve to raise interest rates in the second quarter rose to 34 percent from 28 percent in February, while the number expecting a rate hike in the third quarter has fallen.
“The March survey indicates that investors have started to bring forward the date of the Fed’s first rate hike, rather than continue to push it back,” analysts wrote in the survey’s press release.
Investors are instead turning to European and Japanese equities. A record 63 percent of respondents say Europe is the region they’d be most likely to overweight in the coming year -- the highest portion since the question was first introduced in 2001.
The survey also found that 2 percent of investors said the U.S. dollar is overvalued, representing the first overvalued reading since 2009.
“Investor consensus suggests that the strong dollar will act as positive rather than a negative for the global economy and markets,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research, in the statement.