Institutional investors have sharply reduced their allocation to US equities, with a net 38% underweight position recorded in early May 2025. This marks the lowest level of US equity exposure since May 2023. Outside of that brief episode, such low allocation levels haven’t been seen since the period leading up to the 2008 financial crisis.
Over the past five months, investor positioning has swung dramatically, with net overweight allocations to US equities falling by nearly 70 percentage points — the steepest drop on record. Historically, such extreme shifts have occurred only during moments of significant market stress, including the dot-com bust in the early 2000s, the 2008 crisis, and the COVID-19 shock in 2020.
Throughout the last two decades, periods of net underweight sentiment toward US equities have generally coincided with broader risk-off behavior. For example, in 2005 and again in early 2008, net underweights reached levels below -50%, reflecting widespread pessimism. More recently, similar bearish positioning was seen during 2022 and 2023, coinciding with concerns around inflation and monetary tightening.
In contrast, investor sentiment toward Eurozone equities has strengthened considerably. The difference between fund managers overweight Eurozone versus US equities hit a net 75% in May 2025 — the highest since October 2017. Just four months prior, that figure stood at -62%, marking the lowest since 2012. This 137-point swing reflects one of the most dramatic reallocations of regional equity preferences in over a decade.
The sharp divergence in sentiment highlights a broader shift in institutional strategies. While US equities have historically commanded a premium in global portfolios, many professional investors are now rotating capital toward regions perceived to offer better valuations or macroeconomic stability.
Whether this positioning reflects a temporary reaction to short-term uncertainties or the start of a longer-term trend remains to be seen. But for now, the message is clear: global fund managers are the most cautious on US equities they’ve been in years — and the pivot to Europe appears to be gaining serious momentum.
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