Record "Escape from US Stocks"! For institutions, March 2025 feels like August 2007, August 2011, and even March 2020

As U.S. stocks fell into a 10% correction last week, investors are selling stocks at a record pace. Bank of America stated that beneath the record "exodus from U.S. stocks" is a very pessimistic outlook from investors regarding global economic growth.

The Bank of America survey shows that global fund managers reduced their U.S. stock holdings to the largest extent ever between March 7 and 13. The survey covered 171 fund managers who collectively manage $426 billion in assets. Bloomberg reporter Lisa Abramowicz quoted the Bank of America survey:

For some institutional investors, the market atmosphere in March 2025 is reminiscent of August 2007, August 2011, and even March 2020.

The speed of capital withdrawal from global stock markets this month ranks fifth in this century, while the rise in global macro pessimism ranks seventh highest in the past 30 years.

Stagflation is one of the concerns frequently mentioned by investors, with expectations for this scenario reaching the highest level since the end of 2023. Investors worry that this situation could put the Federal Reserve in a bind, making it unable to address issues through either interest rate hikes or cuts.

Currently, 71% of fund managers expect the global economy to face stagflation in the next 12 months, with the large-scale trade frictions initiated by Trump considered a major trigger.

Another widely mentioned viewpoint in the fund manager survey is that America's "exceptionalism" may have come to an end. 69% of fund managers believe that the outperformance of the U.S. relative to other global markets has "peaked."

As a result, after last week's record reduction, fund managers currently have a 23% underweight allocation to U.S. stocks, the lowest level since June 2023.

Funds are flowing from U.S. stocks to European, UK, and emerging market equities.

Bloomberg noted that the survey results also show that cash levels among fund managers have risen significantly, marking the largest increase since December 2021:

Moreover, it is quite astonishing that Wall Street's "smart money"—hedge funds—suffered a setback during this round of significant declines in the U.S. stock market, even exacerbating the market downturn. According to Goldman Sachs, on the two days of the most intense declines last Monday and Tuesday, the scale of hedge fund sell-offs was the largest in the past four years and also quite rare in the past 15 years. Citadel, P72, and Millennium experienced rare losses across the board in February.

However, Bank of America strategist Michael Hartnett's team also believes that the U.S. stock market may still see a rebound in the short term.

If market concerns about inflation and trade friction ease, the S&P 500 index may break through 6000 points in the second quarter. But if the economy falls into recession, Bank of America expects the S&P 500 index may drop below 5000 points