US investors go significantly overweight equities

The impact of the US Presidential Election has manifested into investor sentiment, with the latest State Street data showing that long-term investor allocations to equities rose to their highest level in more than 16 years last month.

The bullish sentiment towards equities is being led by US investors with others showing less enthusiasm.

State Street Global Markets Head of Macro Strategy, Michael Metcalfe said long-term investors were headed into 2025 with their biggest overweight in equities and sixteen and a half years.

“While there are plenty of uncertainties about growth, policy and politics in the coming year, investor positions suggest their conviction in a US-led equity market rally is unflinching,” Metcalfe said.

“Not only is the overweight in equities high historically, it is also concentrated. Across the regions we track, the US is the only zone investors are currently overweight and it is a sizeable holding,” he said.

“By the end of November, holdings of US equities relative to the rest of the world were close to the most stretched in the twenty-six year history of State Street Global Markets’ data set.”

“In short from the point of view of long-term investor holdings, the US has rarely been so exceptional. In APAC, Japan remains the only area where investors are neutrally positioned, with significant underweights in emerging markets in particular,” Metcalfe said.

“Long-term investor sentiment toward Chinese equities does at least remain constructive in response to, and in the hope for, further stimulus measures from the government. Our new China PriceStats series, meanwhile, shows that retailers are beginning to gain confidence to raise prices. At the end of November the annual inflation rate captured by PriceStats rose above 1% for the first time since March 2023.

“Long-term investor positioning in sovereign fixed income markets has also been less optimistic, but is equally revealing. Demand for French sovereign bonds slumped to a six-month low in November, ahead of the subsequent collapse of the French government. For now, in a telling sign of the lack of contagion, investors remain overweight other high debt countries in the Euro area such as Italy.”