From News To Moves
Fund managers say stocks are currently expensive, but they’re buying them anyway. Foreign money is rushing back into China. Here’s where the smart money is going and how investors can ride the wave.
By Peter Christensen
In Bank of America’s latest survey, nearly a third of fund managers hold more stocks than their usual benchmarks would suggest. That’s their highest stock allocation in seven months, even though more than half of respondents say equities are overvalued. They also trimmed cash holdings to just 3.9%, the lowest in months, signaling that they’d rather be in risk assets than on the sidelines.
That conviction is showing up in flows. Foreign investors are rushing back into China’s $19 trillion stock market, chasing tech, biotech, and artificial intelligence as regulatory pressure eases and U.S.-China trade tensions cool. Morgan Stanley data shows global hedge funds posted their strongest monthly buying of Chinese equities in six months during August.
The message is clear: money is moving, and it isn’t waiting on perfect valuations.
After the largest fund allocators move, everyone else feels the pressure to follow. Smaller fund managers risk underperformance and putting their careers on the line if they don’t join the chase, which amplifies the herd effect. This buying pressure fuels rallies in whichever sectors or regions the big players favor.
On paper, fund managers admit stocks look expensive. In practice, they’re still betting on mood and buying. That disconnect tells us that sentiment and policy expectations are driving decisions more than traditional valuation models. In the short term, capital flows matter more than valuation theory.
The real trigger isn’t earnings or GDP. It’s betting on rate cuts, the stimulus investors never get tired of. Softer U.S. labor data plus dovish signals from the Fed have convinced investors that more rate cuts are coming. Add China’s policy easing and trade thaw with the U.S., and suddenly allocators feel safe to move back in. Today’s policy is the fuel keeping these rallies alive.
Money isn’t moving everywhere at once. Technology remains the global favorite, but European and Chinese markets are back on the menu. Meanwhile, overvalued U.S. growth names are getting trimmed, while allocators rebalance into regions with more policy tailwinds.
Although fund managers widely regard equities as overvalued, they have significantly increased their allocations to stocks, with a particular focus on Europe, China, and technology. It is apparent that momentum, not valuations, is steering global markets. Smart money is not always right; it’s just faster. So click below to learn more about each of the winners you can bet on to gain from this shift:
Global allocators are chasing equities in Europe, China, and technology despite valuation concerns. Policy shifts and momentum flows are the real drivers. Investors positioned in these regions and sectors can ride the wave, but should stay nimble for when crowded trades face valuation reality.
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