Global fund managers have cut back their allocations to U.S. equities. The proportion of investors saying U.S. equities are overvalued has also reached its highest level since May 2000. With the move away from U.S. stocks, allocations to eurozone and Japanese equities have both increased. This move out of U.S. stocks comes amid growing anticipation of U.S. rate hikes.

Investor consensus suggests that the strong dollar will act as positive rather than a negative for the global economy and markets. More investors are also forecasting increases in both long- and short-term interest rates. 

Turmoil in global currency markets is causing more investors to think about how such fluctuations impact the performance of their stocks. Aggressive monetary policy by global central banks has led to the fast depreciation in certain currencies.

Over the past year, the Brazilian real has slid 43%, the euro has fallen over 20%, and the Japanese yen has fallen almost 15%. As a result, more investors are deciding to invest globally, but with hedged currency exposure. There is uncertainty about the future of the euro, and there could be more volatility to come. We believe this makes Europe an attractive place to neutralize currency exposure.