At the beginning of 2023, investors began to get rid of American shares and rushed into assets of other countries, including European ones. Bloomberg writes about the change of preferences in the market with reference to Goldman Sachs analysts.

Only for the first two weeks of the year the outflow of funds from the U.S. shares reached about $5 billion. At the same time, the decline in gas prices, weakening dollar and optimism about the opening of the Chinese economy after lockdowns led to the fact that the funds began to flow into funds focused on shares of Europe, China and emerging markets. European funds, in particular, recorded inflows for the first time in nearly a year.

“We may be at a tipping point for regional equity funds,” said Goldman Sachs portfolio strategy research expert Cecilia Mariotti.

She said there could be even more investment growth in “non-U.S.” funds, as the strategy of diversifying across regions has historically performed better after the dollar peaks.

Outflows from U.S. funds suggest that as the U.S. recession approaches, investors are looking outside the country for new opportunities. With the threat of an economic downturn looming, another argument against US equity funds could be the prevalence of growth-oriented sectors – such as IT – within the S&P 500. Stocks from these sectors are still expensive, and growth could be hampered by continued U.S. rate hikes.

Bank of America has also noticed a decline in the popularity of U.S. stocks. The BofA survey, in which global fund managers participated, shows that recently the choice has been made in favor of European securities and emerging market stocks, as well as cyclical stocks. Funds have reduced their positions in U.S. stocks and in the IT and pharmaceutical sectors, notes Bloomberg.