Previous U.S. equity barometers

Barometer of European interest in U.S. equities

February 2015

Europeans banking on strong dollar to offset caution over market's valuation

During January and February 2015, Phoenix-IR researched the views of 84 leading institutions based in 11 European countries (UK, Switzerland, France, Germany, Belgium, Ireland, Italy, Netherlands, Sweden, Denmark and Austria) managing total assets in excess of $3 trillion.

The results show increased caution towards U.S. equities even though, on balance, Europeans remain slightly overweight the market and optimistic on the dollar.
What do you think of the current valuation of the S&P 500?
  • 54% of investors see the U.S. market as fairly valued which is lower than the 67% reported in the same survey six months ago
  • The proportion believing the market is now overvalued has increased to 44%
  • Hardly anyone thinks the market is undervalued, a viewpoint which hasn't changed for the last 18 months.
  • The net % of respondents who perceive the market to be overvalued has risen to 42% from 33% six months ago
What is your current weighting to U.S. Equities?
  • Not surprising to see weightings moving towards neutrality
  • 45% of the sample reports being neutral, 29% overweight and 26% underweight
  • A small +2% net overweight remains
Over the next 12 months, do you intend to change your weighting to U.S. Equities?
  • For the first time in three years, a significant proportion of investors signal risk of reducing allocations
  • Only 5% report an intention to increase while 24% intend taking money off the table
  • The proportion signaling no change is up to 71%
  • Net -19% of the sample reports they might decrease
What are your current U.S. sector allocations?
  • Four sectors are popular (above the line = overweight) and six are not so popular (below the line = underweight)
  • Health Care is the most popular, just ahead of Consumer Discretionary which sees a big upsurge
  • Technology continues to be popular but now in third place
  • Industrials sees improvement and remains firmly overweight
  • Consumer Staples is only just below the line
  • Financials, Materials, Telecom and Energy are now quite clearly underweight
  • Utilities sees the biggest decline in popularity
What is your current view on U.S. sector valuations?
  • Three sectors are seen as clearly overvalued: Utilities, Consumer Staples and Telecom
  • Materials also seen as slightly overvalued
  • Four sectors are clustered around the fairly valued line: Energy, Health Care, Consumer Discretionary and Financials
  • Technology and Industrials are seen as the two most undervalued sectors
Over the next 12 months, how do you expect the U.S. dollar to perform?
  • Investors are the most bullish they’ve been on the US Dollar for last three years
  • No-one expects the USD to depreciate in the next 12 months
  • 66% expect USD to appreciate and 34% expect it to remain at current levels
  • A net 66% expect USD to be higher in 12 months time
Market expectations for corporate earnings for the next 12 months?
  • Most investors believe earnings expectations are slightly too high
  • The "Net % too high" reading is up at 54% which is elevated compared to prior surveys
How would you describe your current cash position?
  • Cash positions continue to high
  • The proportion with a normal cash allocation is falling while the above normal proportion is rising
  • A net 26% of respondents describe their cash position as higher than normal
What is your expected rate of return for the S&P 500 over the next 12 months?
  • Expectations for 12 month target returns have decreased over the last six months and now stand at only 3.2%
What is the average holding period of stocks in your portfolio?
  • Most investors in the sample are longer-term
What is the Active Share Ratio of your portfolio?
  • Most investors in the sample are stock pickers

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