Republican Donald Trump’s win in the US Presidential election has led to sell-off in technology stocks and emerging markets (EMs), and has accelerated rotation into banks, out of high dividend yield and bond proxies and catalysed buying of US equities, Bank of America Merrill Lynch (BofA-ML)’s latest global fund manager survey said.
The survey showed that allocation to EM equities fall sharply to net 4% overweight from 31% overweight last month. The allocation to commodities also dipped to net 2% underweight from neutral last month.
On the other hand, the allocation to eurozone equities improved to a five-month high of 8% overweight from net 5% last month.
One of the key takeaways was that cash levels slumped from 5.8% in October to 5% in November, as global growth and profit expectations rise to a one-year high and the US election result is seen an unambiguously positive for nominal GDP.
BofA-ML also flagged that a drop in cash to less than 4.8% in December would be a tactical negative as a 1 percentage point fall in two months historically causes risk sell-offs.
A record net 56% of investors think current fiscal policy is too restrictive and global inflation expectations may soar to 85%—the highest in 12 years, the survey showed, and it sees protectionism as the biggest risk to financial market stability.
Around 44% of investors think the rotation to cyclical styles and inflationary sectors will continue well into 2017.
The November Global Fund Manager Survey was conducted between 9 and 14 November after the US election results were known and 177 clients with $456 billion assets under management (AUM) participated in the same.