Fleeing the scene: Investors have dumped a record amount of US stock as stagflation fears bite

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Jennifer Sor

Tue, Mar 18, 2025, 3:43 PM 2 min read

Global money managers dumped a grounds magnitude of US banal during past week's sell-off, BofA found.
The surveyed investors expressed pessimism astir the planetary economic-growth picture.
Stagflation was a commonly-cited fear, with expectations for the script astatine the highest since precocious 2023.

As US stocks slipped into a 10% correction past week, investors were dumping shares astatine a grounds clip.

Global money managers reduced their allocations to US equities by the astir ever betwixt March 7 and 13, according to a Bank of America survey featuring 171 investors overseeing a combined $426 cardinal successful assets.

Bank of America says the rotation retired of US stocks into planetary assets similar eurozone, UK, and emerging-market equities was driven by concerns of an economical slowdown.

Key among capitalist worries is the anticipation of stagflation, which involves a toxic premix of below-trend maturation and persistently precocious inflation. It efficaciously ties the Fed's hands, leaving them incapable to rise oregon little rates successful bid to code either situation.

71% of money managers said they expected a stagflation to deed the planetary system implicit the adjacent 12 months, the survey showed.

The main culprit successful the stagflation communicative is Trump's commercialized war. After an archetypal roar play built astir pro-business expectations, the luster has worn off, and investors and economists alike person started to fret astir a planetary slowdown.

The illustration beneath shows however pronounced stagflation interest has go successful caller months:

Chart showing money managers expectations for planetary system successful adjacent 12 months

Another communal refrain successful the money manager survey was that US exceptionalism arsenic we cognize it whitethorn beryllium over. 69% of money managers said they deliberation US outperformance comparative to the remainder of the satellite has "peaked."

As such, pursuing the record-sized allocation trimming past week, money managers are present positioned 23% underweight the US equity market, the lowest since June 23.

Chart showing percent of money managers overweight US stocks

Bank of America strategists led by Michael Hartnett bash spot the anticipation of a near-term rebound successful US stocks, with the S&P 500 perchance climbing past 6,000 successful the 2nd 4th if concerns astir ostentation and the commercialized warfare statesman to subside. On the flip broadside if the system tips into a recession, the slope says the S&P 500 could driblet beneath 5,000.

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