European stocks experienced their second-highest allocation in 25 years this January, according to a BofA Global Research investor survey released on Tuesday. This surge indicates a renewed interest in European equities as lagging risk assets begin to recover.
In a report aptly titled “Make Europe Great Again,” BofA (BAC) highlighted a prevailing risk-on sentiment among investors. The survey revealed a bullish outlook towards U.S. dollar (DX=F) and stocks, contrasted by a bearish stance on other asset classes.
The survey, encompassing 182 participants managing $513 billion in assets, showed investors held their lowest bond positions since October 2022. Cash levels also remained low at 3.9%, suggesting a strong preference for investment in higher-return assets. This shift in allocation underscores a growing confidence in the European market’s potential for growth.
Furthermore, the report identified a disorderly rise in bond yields as the most significant bearish risk for 2025. This concern highlights the potential for market volatility and underscores the importance of careful portfolio management in the face of changing economic conditions. While investors are currently embracing risk, the potential for rising bond yields looms as a significant threat to market stability.
In conclusion, the substantial investment in European stocks signifies a notable shift in investor sentiment. The resurgence of interest in these assets suggests a positive outlook for European markets. However, the identified risk of a disorderly rise in bond yields necessitates a cautious approach and emphasizes the need for ongoing market analysis. The findings from the BofA survey provide valuable insights into current investor sentiment and potential future market trends.
