Equities are kicking off 2023 with a dramatic reversal in trends, with investors flocking to non-US assets, according to Goldman Sachs Group Inc. strategists.
The country’s equities have seen outflows of about $5 billion just in the first two weeks of the year, strategists led by Cecilia Mariotti wrote in a note dated Jan. 17. Meanwhile, lower gas prices, a weaker dollar and optimism about China’s economic reopening have spurred inflows into stock funds of Europe, China and other emerging markets.
“We might be at a turning point for regional equity fund flows,” Mariotti wrote, adding that there’s a case for “a more meaningful acceleration” in non-US flows “as regional diversification has historically proved more valuable past the dollar peak.”
European equity funds saw inflows for the first time since Russia invaded Ukraine nearly a year ago, according to Goldman citing EPFR Global and Haver Analytics data.
The data are the latest evidence that investors are eyeing opportunities outside the US as recession looms. Moreover, the dominance of expensive growth-linked sectors such as technology in the S&P 500 may put off some as rates are still rising. Bank of America Corp.’s latest fund manager survey this week showed investors are the most underweight on US equities since 2005.
Elsewhere, strategists including at Citigroup Inc. and Goldman Sachs have turned more bullish on European stocks as economic growth proves resilient.
Mariotti said a drop in commodity prices and signs of cooling inflation had boosted market optimism more broadly, pushing the bank’s custom risk appetite indicator into positive territory since the start of the year.
This article was provided by Bloomberg News.