Barring the two-day recovery across last Friday and this Monday, US indices like the S&P 500 had plunged into “correction territory” or a 10% fall from their peak, while the Nasdaq was down 14% from the top. The smallcap Russell 2000 index was near “bear market” zone, after a fall of nearly 20% from its record high.
“Peak US exceptionalism is reflected in record rotation out of US stocks,” BofA strategist Michael Hartnett wrote in a note.On the flip side, the survey showed that the allocation to stocks in the Eurozone has hit the highest level since 2021. European markets were outperformers on Tuesday as well, even as Wall Street sold off, after Germany, one of its largest economies, approved a major spending package marking a shift from its austerity stance.
Cash levels have now reached 4.1%, from 3.5% last month, marking the biggest jump since 2020, according to the survey. Sectors like consumer staples, which traditionally act as defensive plays in a weak market, saw an increase in allocation, while tech, the outperformer of the last two years, saw a sharp cut.
Hartnett, the Bank of America strategist, said the swift deterioration in investor sentiment was consistent with the end of a correction in the US equity market. Still, he predicted that the S&P 500 would rise back above 6,000 points only if there was an easing in trade war and inflation concerns.
(With Inputs From Agencies.)
