Fund Managers Ditch Stocks Amid Tariff Threats, Retail Investors Buy Despite Fears

Global fund managers' confidence in the US stock market has dropped amid tariff threats and economic uncertainty, with 55% citing a trade war-induced recession as the biggest risk. However, retail investors have invested nearly $70 billion into US stocks this year, with "buy the dip" sentiment remaining strong despite fears over President Trump's policies. Fund managers have increased their cash positions, following Warren Buffett's lead, but retail investors remain optimistic about the market.

In recent weeks, global fund managers have exhibited a significant shift in their sentiment towards the US stock market. According to the latest Bank of America Global Fund Manager Survey, which polled 171 asset allocators managing £426bn, investor sentiment towards US equities has taken a hit [1].

The survey's broadest measure of fund manager sentiment, which is based on their equity allocations, cash levels, and global growth expectations, fell to 3.8 in March from 6.4 in February [1]. This marks a seven-month low and the largest decline since March 2020 [1].

The US exceptionalism narrative, which has driven the market's outperformance for an extended period, is starting to crack. A staggering 69% of respondents believe that this theme has peaked [1]. This sentiment shift is reflected in the record rotation out of US stocks. The allocation to US equities dropped 40 percentage points to a net underweight of 23% [1].

Despite the pessimistic outlook from fund managers, retail investors have continued to pour money into US stocks. According to a recent report by Trustnet, there has been a record rotation out of US stocks by fund managers, but retail investors have invested nearly $70 billion into US stocks this year [2]. This contrasting behavior is often referred to as the "buy the dip" mentality, where investors buy stocks when they experience a decline in price, regardless of the underlying fundamentals.

The reasons for the divergent views between fund managers and retail investors are multifaceted. Fund managers are often more risk-averse and rely on a more comprehensive analysis of economic and market data. They are also more likely to be influenced by geopolitical events, such as trade tensions and economic uncertainty. In contrast, retail investors are often more speculative and may be influenced by emotions, such as fear and greed.

Despite the ongoing uncertainty, some analysts remain optimistic about the US stock market. Warren Buffett, the legendary investor and CEO of Berkshire Hathaway, has increased his cash position, following the lead of many fund managers [1]. However, he remains bullish on the long-term prospects of the US economy and the stock market.

In conclusion, the latest data suggests that global fund managers have become more bearish on the US stock market, while retail investors remain optimistic. This divergence in sentiment highlights the importance of understanding the different motivations and perspectives of various market participants.

References:
[1] McKenna, G. (2025, March 24). Growth Expectations: Global Fund Managers Stocks, Cash, Warren Buffett. Fortune. https://fortune.com/2025/03/24/growth-expectations-global-fund-managers-stocks-cash-warren-buffett/
[2] Trustnet. (2025, March 23). Fund managers make record shift out of US stocks. Trustnet. https://www.trustnet.com/News/13442659/fund-managers-make-record-shift-out-of-us-stocks/