By Graham Summers, MBA | Chief Market Strategist
The U.S. stock market is now officially hated.
This is not an opinion, investors are voting with their cash. According to the Bank of America's fund manager survey, U.S. stocks just experienced their largest drop in capital allocation in history.
See for yourself. Investors are fleeing the U.S. in droves and piling into European stocks. And not by a little: again this was the largest drop in U.S. stock allocation in history.
How skewed is the pro-Europe/ anti-US trade? The ratio between the S&P 500 and the Europe ETF (IEV) is at its 40-month simple moving average (the same as the 200-week simple moving average). Over the last 15 years, this has marked the BOTTOM for European equities outperformance relative to their U.S.-counterparts. Sure, this time might be different... and we're about to enter the golden age of European stocks... but given what is happening there from a macro-perspective, is that really something you want to bet on?
Between this and the historically oversold nature of the stock market, it is HIGHLY likely the lows are in... or about to be in. U.S. stocks are hated, oversold, under-allocated, and due for a bounce.
Put simply, the odds favor a rally, NOT a crash.
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Best Regards
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
