Investors moving to U.S. stocks as European woes grow: BoAML survey

Investors are increasingly attracted to U.S. stocks as the fiscal/sovereign debt crisis in the euro zone deepens, according to a fund manager survey by Bank of America-Merrill Lynch (BoAML)

A net 16 percent of asset allocators are overweight in U.S. stocks in December, versus a net 1 percent in November. A net 4 percent are underweight euro zone equities, compared with a net 15 percent overweight in November.

“Despite rising confidence in global growth, the survey shows that Europe is losing investor support as political procrastination and banking concerns overshadow a strong corporate outlook,” said Gary Baker, head of European Equities strategy at BoAML Global Research.

Investors are also getting increasingly sanguine about the U.S. dollar, with a net 36 percent of investors forecasting dollar appreciation in 2011, up from a net 14 percent in November.

The survey also indicated that a net 44 percent of the respondents predict the global economy will strengthen in 2011, compared to 35 percent a month earlier.

A net 51 percent expect corporate profits to improve next year, up from 36 percent in November. Moreover, more investors believe that inflation is likely to rise with a net 61 percent of the panel forecasting higher core inflation in 2011.

In the U.S. regional survey, the net percentage of U.S. investors expecting double-digit profit growth has doubled month-on-month to 40 percent.

“The pending new tax deal in the U.S., combined with QE2, has restored confidence in the prospects of U.S. companies, at a time that Europe is out of favor and investors are questioning Chinese growth prospects,” said Michael Hartnett, chief Global Equity strategist at BoAML Global Research.

In addition, energy has supplanted technology as the world’s favorite stock sector for the first time in a year.

BoAML indicated that tech had been the top pick of investors for eleven consecutive months since January. However, now a net 38 percent of asset allocators are overweight in energy, up sharply from a net 24 percent in November. A net 34 percent of the panel is overweight in technology, a monthly fall of one percentage point.

Banks keep losing investor interest, with a net 28 percent of global investors underweight in the sector. European investors were particularly fleeing bank stocks -- a net 47 percent of European respondents are now underweight in banks, up from a net 22 percent in November.

A total of 209 fund managers, managing a total of $569 billion, participated in the global survey from December 3 to December 9.

A total of 174 managers, managing $401 billion, participated in the regional surveys.