China smartphone shipments slumped in June on inventory overhang: Jefferies
Investing.com -- Active managers have been making significant portfolio moves in recent months, cutting exposure to Energy while increasing their positions in Consumer Staples and quality stocks, according to a new update from BofA Global Research.
“Over the last three months, large cap active mutual funds have pared exposure in Energy more than any other sector – also true over the past year,” strategists led by Savita Subramanian note.
This comes despite Energy’s historical inflation hedge characteristics and potential exemption from proposed tariffs under U.S. President Donald Trump.
At the same time, Consumer Staples gained traction, as managers grew more cautious amid macro uncertainty.
According to BofA’s team, the sector “saw the biggest increase in funds’ relative weight over the last three months,” attributing the move to slowdown concerns and tax-related tailwinds for lower-income consumers.
This positioning and momentum may persist, strategists added, as valuations for “more take-home pay” beneficiaries have lagged since the draft’s release, leaving the basket relatively cheap compared to historical levels.
A broader tilt toward higher-quality stocks has also emerged. For over a year, managers have been rotating from low to high quality equities, and are now overweight high quality names and underweight low quality ones “at historically extreme levels.”
“We see support for further re-rating in quality if volatility remains elevated which in our view is likely,” strategists said.
In terms of sector preferences, Communication Services has surged in popularity, while Information Technology has been left behind. Funds now hold Communication Services at “a ~40% overweight near record highs,” with names like Alphabet (NASDAQ:GOOGL) and Meta (NASDAQ:META) among the most widely owned stocks.
In contrast, the Tech sector is underweight by about 10%, close to record lows. Still, within Tech, ownership breadth has changed significantly—NVIDIA Corporation (NASDAQ:NVDA) is now held by 74% of funds, up from just 5% in 2016, while Intel (NASDAQ:INTC) has dropped to 10% from 26%.