LIVE MARKETS-Global equity allocations at peak since financial crisis

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GLOBAL EQUITY ALLOCATIONS AT PEAK SINCE FINANCIAL CRISIS

Institutional investors flocked back to equity markets in July, ready to take on more risk and increase their allocation to risky stocks as tariff fears fade, State Street found.

The company's Risk Appetite Index rose to 0.54 in July, marking the highest reading since November 2020, back when markets were reeling from the COVID-19 pandemic-induced selloff.

Institutional investors' allocation to stocks rose 0.7%, reaching 54.8%, the most optimistic stock holding since November 2007, the indicator found.

Apart from the financial crisis, the only other time they were higher was during the dot-com bubble of the late 1990s.

"This suggests that investors believe the peak of uncertainty, whether geopolitical or policy-related, has passed," said Michael Metcalfe, head of macro research at State Street Markets.

Benchmark indexes in the U.S., London, Germany and Canada, among others hit record highs in July, as corporate earnings showed resilience globally, and investors took U.S. President Donald Trump's tariff volley in their stride.

Businesses globally have been flagging significant earnings hits from Trump's tariffs, while some have withdrawn their financial forecasts as uncertainty continues to cloud corporate investment decisions.

Recent U.S. data has also shown weakness in the labor market, fanning concerns over the health of the world's largest economy.

"The stark contrast between their (investors) confidence and the ongoing decline in business confidence, especially in the U.S., is concerning," said Metcalfe.

On Friday, flows data from BofA Global Research showed a whopping $41.7 billion out of equities, with more than 66% out of U.S. equities in the first week of August.

(Purvi Agarwal)

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