Investing.com -- Despite European equities reaching all-time highs, 66% of fund managers expect further near-term gains, according to Bank of America’s (BofA) latest European Fund Manager Survey.
This marks a jump from 44% last month, highlighting growing investor confidence in the region’s markets.
Investor sentiment toward European economic growth has also improved. “A net 45% of respondents expect stronger European growth over the coming twelve months, up from only 9% last month and the highest level since May last year,” said the bank.
According to BofA, the main catalysts behind this optimism are German fiscal stimulus and potential European Central Bank (ECB) rate cuts.
Additionally, 59% of respondents anticipate lower inflation in Europe, further supporting the bullish outlook.
Beyond short-term gains, 76% of survey participants project European equities will rise over the next year, up from 56% last month.
“A plurality of investors expecting further increases for European equities to be driven by earnings upgrades,” adds BofA. “A plurality of investors expects Europe to be the best performing equity market globally this year, with a net 12% saying they are overweight European equities in a global context, while in December a net 25% said they were underweight.”
In terms of sector preferences, banks are said to have become the largest overweight for the first time since July 2023, overtaking insurance.
However, sentiment toward small caps remains weak, with 14% expecting them to underperform large caps—the most pessimistic reading in six months, according to BofA.
Meanwhile, Germany remains the most favored equity market in Europe, while Switzerland is the least loved.