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Investing.com -- Investor flows into US equities have slowed as capital shifts towards Europe and China, according to Barclays (LON:BARC) analysts.
"US equity flows in the past month have slowed to $33bn, the lowest since August, while the dollar retreated and Tech longs were trimmed," the analysts wrote.
Meanwhile, European equities have seen a resurgence, with "Europe (ex UK) equity inflows picking up notably to $10bn YTD, reversing almost half of post-US election outflows."
Barclays said the shift comes as systematic funds continue to buy equities, but mutual fund inflows have moderated.
"Sentiment has generally dipped from post-Trump election highs, and the bullish retail cohort shows signs of fatigue," Barclays noted. They add that while macro hedge funds have reduced their short positions, they are not yet fully long on equities, adding to the uncertainty.
Europe’s rally has been driven by "a buying spree on EU Banks and a short squeeze on deep Cyclicals," with hedge funds holding high exposure to financial stocks while cyclicals such as Autos, Chemicals, and Miners see renewed interest, according to the bank.
Barclays says the outlook for further European inflows, however, remains dependent on "earnings, clarity on tariffs and Ukraine, as well as continued optimism post the outcome of the German elections."
China has also seen a strong rebound in foreign inflows, largely benefiting from "rotation out of India and foreign investors buying into China Tech stocks since the DeepSeek news."
However, Barclays analysts warn that upcoming Nvidia (NASDAQ:NVDA) earnings will be important in determining the next steps for global tech positioning.
Despite this rotation, UK equities remain out of favor, with "domestic shorts at the highest levels since the mini-budget crisis," suggesting continued investor skepticism towards British markets.