Investors are going all in on the global divergence trade

[LONDON] America First is captivating investors like never before, at the expense of other world markets.

Money managers with US$724 billion have the most favorable outlook on US profits on record, according to Bank of America Merrill Lynch's latest investor survey. And their positioning matches that optimism: allocation to American stocks is 21 per cent overweight, the highest since January 2015. That compares to an 11 per cent overweight for eurozone equities, which is an 18-month low.

Meanwhile, their allocation to emerging-market equities has fallen further into the red, to 10 per cent underweight, the lowest since March 2016 and a "massive reversal" from the 43 per cent overweight seen in April this year, according to Bank of America strategists including Michael Hartnett.

Some other highlights of the survey include:

Investors have the worst outlook on the global economy since December 2011; 24 per cent expect global growth to decelerate in the next 12 months, from 7 per cent in August.

Cash allocations are running at 5.1 per cent compared with an average 4.5 per cent over the past 10 years.

Positioning to commodities is at the lowest in a year - and turned underweight for the first time in six months.

BAML's survey was conducted from Sept 7 to 13 among 244 panelists.

BLOOMBERG