The 'sell America' trade was widely referenced back in April, after US stocks tanked on tariff concerns.
On 2 April, US President Trump unveiled sweeping tariffs of between 10% and 99% on more than 180 countries on 'Liberation Day'.
That sent US equity markets into a downward spiral, with the tech-heavy Nasdaq Composite Index (NASDAQ: .IXIC) officially entering a bear market on 8 April. On that day, the index had declined more than 20% from its recent peak.
Since then, US stocks have rebounded strongly.
Since April 7, the Nasdaq Composite Index has rebounded 28%. Meanwhile, the S&P 500 Index (SP: .INX) has risen 20% over the same timeframe.
US-focused ASX exchange-traded funds (ETFs) have also recovered. The Betashares Nasdaq 100 ETF (ASX: NDQ), which tracks the 100 largest technology companies listed on the Nasdaq, is up 21% since 7 April. Meanwhile, the Vanguard US Total Market Shares Index AUD ETF (ASX: VTS), which tracks the entire US market, is up 14% since 7 April.
Does this reflect global investor sentiment?
Not exactly.
According to a recent article in The Australian, global institutional investors are heavily positioned against American assets. Based on a Bank of America study, respondents reported a net 36% underweight position in US equities. This reflects the most underweight stance on this market in two decades.
Despite US equities rallying in recent weeks, respondents have an extremely negative view of the US currency. The 'sell America' trade is alive and well in the eyes of many institutional investors.
According to the survey, a net 61% of respondents viewed the US dollar as overvalued.
The most crowded trades remain long gold (41%), long Magnificent 7 stocks (23%), and short US dollar (20%).
This comes after the world's second-largest asset manager, BlackRock, rebalanced its model portfolio earlier this week. The fund manager reallocated funds from Australian and European stocks to Emerging Markets stocks, citing a more favourable outlook and cheaper valuations.
Foolish Takeaway
ASX investors have become accustomed to expecting double-digit returns from US equities.
According to the Vanguard Index Chart 2024, US shares have compounded at an average of 11.1% over the past 30 years. That figure is ahead of Australian shares, which have compounded at an average of 9.1% over the same time frame.
In April, a record number of retail investors took the opportunity to 'buy in the dip' when markets fell.
This strategy has paid off since 2009, which marked the beginning of the longest bull market on record, lasting 11 years.
US technology stocks were among the most popular stocks for retail investors in April.
However, this decision seems to be at odds with institutional investors who see the US as an increasingly risky place to invest and have diverted funds elsewhere.
