BofA survey: Investors more bullish on EU equities, U.S. growth expected to slow

Published 15/07/2025, 11:00
© Reuters

Investing.com -- European fund managers have grown more optimistic about the region’s growth and equities outlook, with a clear tilt away from the U.S. as confidence in its economic momentum wanes, according to Bank of America Securities’ latest monthly survey.

A net 44% of respondents expect stronger European growth in the next 12 months, up from 29% in June.

The gap to global growth expectations remains wide, while “a plurality now considers Euro area fiscal stimulus to be the biggest positive factor for global growth overall, taking over the lead from U.S. policy support,” BofA analysts led by Andreas Bruckner said.

Meanwhile, 63% expect U.S. growth to decelerate, and the same share believes Europe will decouple from American policy headwinds thanks to fiscal spending, up from 25% last month.

“63% expect U.S. growth to slow over the coming months with less than 10% expecting an acceleration, as a majority gauges President Trump’s policy agenda as growth negative and inflation positive,” the report state.s

In contrast, investors are increasingly bullish on European stocks. A net 81% project gains for European equities over the coming year, while a net 41% report overweight positions—the highest since 2021. That contrasts with a net 23% underweight in U.S. equities.

74% of participants believe Europe’s structural underperformance could reverse if fiscal expansion is paired with renewed European integration, the survey found.

Style preferences also shifted notably. “A net 37% of respondents expect further upside for European cyclicals relative to defensives,” the report says, up from 18% last month.

Small caps, value, and high-quality stocks gained favor, with banks remaining the top consensus overweight, followed by technology and industrials. Autos, retail, and basic resources were the most underweighted sectors.

Germany retained its status as the most preferred equity market in Europe, while Switzerland and France were the least favored.

Within sectors, industrials are expected to be the best performers over the next 12 months, edging out financials.

Over half of respondents think European banks still look attractive even after their rally, and 74% now say that not having enough cyclical exposure is their biggest portfolio risk.

Meanwhile, the macro backdrop remains mixed. A plurality of 44% expects stagflation in the near term, and a net 4% of investors now anticipate higher core inflation in Europe, compared to a net 29% expecting lower inflation last month.

Cash levels dropped to 3.4%, indicating increased risk appetite, while sentiment toward the U.S. dollar remained bearish.

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