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Investing.com -- Active managers rotated back into technology and industrials in the last quarter, while shedding health care exposure, according to a new update from Bank of America.
BofA said in a note to clients that long-only funds (LOs) “added exposure to Info Tech over the last quarter after hitting a record underweight in 1Q.”
Relative weights in technology rose by four percentage points to 0.98 times, with “notable increases in Nvidia, Broadcom and Microsoft.” Even so, BofA noted that tech allocations remain “below the historical average of 1.03x.”
The bank added that industrial stocks also saw significant inflows. LOs boosted exposure by three percentage points, with BofA reporting the sector is now “at a record overweight of 1.2x in our data.”
By contrast, health care was heavily sold as investors reacted to “policy risks and poor performance (worst sector YTD).”
BofA said UnitedHealth Group, down 40% this year, saw the steepest drop in ownership, with fewer than half of LOs now holding the stock compared with around 60% three months ago.
Overall, exposure to health care is said to have fallen by eight percentage points to 1.05 times, the lowest in more than three years. Excluding Eli Lilly, BofA said, the sector is now underweight.
Despite widespread concerns about equity valuations, BofA found managers were “sticking with what has worked, and are willing to pay up for historical success.”
Momentum remains more overweight than at any point in the past year, and the most widely held stocks are trading near record premiums to the S&P 500.
Looking ahead, BofA said its U.S. Regime Indicator is “on track to flip to Recovery next month,” a phase that has historically favoured value, high risk, high dividend yield and small-cap stocks, all areas currently underowned by active managers.