Investors bullish on Europe, less positive on global growth: BofA survey

Investing.com -- Investors are increasingly bullish on European economic growth and equities while remaining cautious about global prospects, according to BofA’s latest European Fund Manager Survey.

The survey shows that only a net 46% of participants expect the global economy to weaken over the coming year, down from 59% last month and a record 82% in April, as tariff threats fade.

The soft landing scenario is becoming the dominant expectation, with 66% of investors seeing it as the most likely outcome, compared to just 37% in April.

However, the Trump administration’s policy mix continues to be seen as the “largest downside risk.”

“A trade war that triggers a global recession is considered the biggest tail-risk by around half of the respondents and close to two-thirds think only very little of the tariff shock is already in the price,” strategists led by Sebastian Raedler noted.

In contrast, sentiment toward Europe remains more optimistic. A net 29% of respondents expect stronger European growth over the next year, supported in part by expectations for German fiscal stimulus.

BofA notes that "a plurality of 79% of European investors consider German fiscal stimulus as the most likely catalyst for European growth to strengthen."

Still, concerns linger over Europe’s ability to decouple from global weakness, with 68% saying that the continent’s open economy cannot remain immune to global headwinds.

On equities, a net 34% of investors are overweight European equities relative to their benchmarks, near a four-year high, while a net 36% remain underweight U.S. equities.

Near-term optimism for European stocks also persists, with a net 36% expecting upside over the coming months and a net 75% projecting gains over the next twelve months.

“A plurality of 43% see reducing equity exposure by too much and thus missing out on a potential further rise in equities as the biggest risk when making portfolio decisions,” the report states.

The earnings outlook has also improved sharply, with a net 61% expecting 12-month forward EPS in Europe to rise, up from 38% last month.

As for sector positioning, banks remain the top overweight at 39%, followed by utilities and insurance. Autos, chemicals and retail are the most underweighted sectors. Germany continues to be the most favored equity market in Europe, while France ranks as the least preferred.

The survey also reveals that European investors continue to view monetary policy as tight, with a net 21% saying policy is too restrictive.

Meanwhile, cash levels among European fund managers dropped to 3.9% from 4.1% last month.

The survey was conducted between June 6 and June 12, 2025, and included responses from 222 panellists overseeing $587 billion in assets.