Heavyweight investors switch from US stocks to gold and cash

A regular survey of institutional, mutual and hedge fund managers has given a great insight into how they behaved during the tariff turmoil.

16th April 2025 13:58

Graeme Evans from interactive investor

Gold has displaced the Magnificent Seven as the most crowded trade after professional investors revealed the largest ever two-month drop in their US stock allocation.

April’s Bank of America survey of institutional, mutual and hedge fund managers is the fifth-most bearish in a quarter of a century, only beaten by sentiment in 2001, 2009, 2019 and 2022.

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The poll involving 164 respondents with $386 billion (£291 billion) assets under management took place during the height of Wall Street’s tariffs turmoil between 4 April and 10 April.

The S&P 500 briefly touched bear market territory but recent White House tariff concessions have since helped to calm the mood and reduce the year-to-date fall to just over 8%.

At the time of the survey, a net 42% of investors said they expected a global recession - the fourth-highest level in the past 20 years and a big flip from last month’s net 52% saying that a recession was unlikely.

Those predicting that the global economy will suffer a hard landing also rose to 49% from 11% in March, a viewpoint that fuelled a wider flight from risk towards bonds, cash and defensive sectors such as utilities, healthcare and staples.

The survey’s cash allocation level rose to 4.8%, up 125 basis points since February in the largest two-month increase since the start of the pandemic. A record rotation means investors have their most overweight position in relation to bonds since December 2023.

In contrast, allocation to US equities dropped to a net 36% underweight for a record two-month decline of 53 percentage points as three-quarters of investors agreed that the theme of US exceptionalism has peaked.

The positioning is a far cry from the week after Donald Trump won the race for the White House in a Republican sweep, when fund managers backed US stocks to be 2025’s best asset class.

In addition, a net 61% of respondents now expect the US dollar to depreciate over the next 12 months. This is the highest reading since May 2006.

The position of professional investors on global equities has moved to net 17% underweight, representing the worst back-to-back fall since April 2020.

Gold is now expected to be 2025’s best-performing asset, according to 42% of investors, whereas global equities is the fourth top pick at just 11% compared with March at 39%. Safe-haven demand today meant the gold price hit a fresh record above $3300 an ounce.

Long gold positions are currently the most crowded trade, with 49% of respondents believing this to be the case compared with 24% for mega-caps such as NVIDIA Corp (NASDAQ:NVDA), Tesla Inc (NASDAQ:TSLA), Apple Inc (NASDAQ:AAPL) and Microsoft Corp (NASDAQ:MSFT).

This ends a 24-month streak for the Magnificent Seven as the allocation to tech also pulled back in April to the lowest figure since November 2022 at net 17% underweight.

In contrast, allocation to utilities rose to its highest since December 2008 as part of a rotation to defensives that also included staples and healthcare stocks.

The current allocation to UK stocks is above the long-term average although inventors are a net 3% underweight this month compared with 4% overweight in March.

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