LONDON (Reuters) – The variety of sovereign investors planning to underweight U.S. belongings within the subsequent 12 months has jumped to 43 %, a survey confirmed, with virtually a 3rd citing trade wars and elevated protectionism as the most important tail danger.
The shift in sentiment within the ballot, carried out by the U.S.-based Sovereign Wealth Fund Institute in February, displays a turbulent month in international inventory markets and strikes by U.S. President Donald Trump to slap tariffs on quite a lot of imports.
The survey, which coated 25 pension funds, sovereign wealth funds and different public asset house owners with an estimated $1.21 trillion in belongings, confirmed these planning to underweight U.S. publicity within the subsequent 12 months had leapt from 25 % within the December survey.
Meanwhile, the share of investors planning to obese the U.S. slumped to eight.7 % from 20.eight %.
Around a 3rd additionally stated they deliberate to underweight passively-managed international equities, up from simply 14.three % in December.
The discount in danger urge for food follows a rollercoaster journey for international equities in February after U.S. wage progress numbers sparked fears the Federal Reserve was behind the curve and would wish to increase rates of interest extra shortly than anticipated.
Both the S&P 500 and the Dow Jones suffered their largest proportion drops since August 2011 in early February, and ended the month down round four %.
The survey, despatched to media late on Tuesday, additionally revealed a notable shift in investor considering on the most important tail danger, with trade wars and elevated protectionism leapfrogging a inventory market bubble into pole place. Seven respondents selected trade wars within the February ballot, up from simply three within the earlier quarter.
Trump has repeatedly rattled the saber on trade over the previous month, introducing measures towards imported washing machines and photo voltaic panels. In early March he turned up the warmth, threatening hefty tariffs on metal and aluminum imports.
The strikes triggered one other fairness market unload as investors fretted about retaliation from exporting nations.
Not surprisingly given the spike in volatility in February, there was a rise within the variety of asset house owners saying they deliberate to obese money within the subsequent 12 months, to virtually 50 %, up from 41.7 % within the earlier quarter.
Just underneath a 3rd of respondents continued to cite lengthy U.S. know-how equities as probably the most crowded trade, with some 30.four % saying they deliberate to underweight info know-how shares within the subsequent 12 months. This was up from simply 9.5 % final quarter.
Tech shares rallied virtually 37 % in 2017, however completed February flat.
Volatility in listed equities additionally appeared to encourage investors to look intently at growing their publicity to personal markets.
Some 52.6 % stated they have been planning to obese personal infrastructure over the subsequent yr, up from 30.four % in December. Half of respondents additionally stated they deliberate to obese personal fairness, up from 29.2 % final quarter.
A current report from State Street Global Advisors put sovereign wealth funds’ personal market holdings at over $1.6 trillion. However, some funds have struggled to get publicity to infrastructure belongings, with demand persistently outstripping provide.
Reporting by Claire Milhench; Editing by Matthew Mpoke Bigg