ARC Q1 survey reveals that wealth managers are reassessing their exposure to the US

The latest investment-manager sentiment survey of CIOs from Asset Risk Consultants (ARC) has found that wealth managers are reassessing their exposure to the US, with the biggest negative sentiment swing for 15 years.

The ARC Market Sentiment Survey, a quarterly poll of 78 investment-management CIOs, which examines the 12-month outlook for the major asset classes and sectors, revealed a cautious tone, with conviction levels declining across all major asset classes.

The geopolitical and macroeconomic backdrop shaped by the early months of President Trump’s return has led many firms to reassess exposure to US assets. Sentiment was four per cent net negative to US assets compared to 36 per cent net positive a year ago.

While the net sentiment towards equities overall remained positive at 29 per cent, this has also softened from 40 per cent in Q1 last year. Bonds suffered the biggest drop in sentiment, down to 29 per cent from 44 per cent net positive a year ago.

The investment consultancy highlighted that while many investment firms made no changes, those that did primarily reduced US-equity exposure, particularly in large caps and technology stocks. Some increased exposure to US small and mid-caps, while some used call options on the S&P 500, suggesting a targeted rather than broad bullish outlook. Firms reducing their exposure actively hedged US-dollar exposure and reduced equity allocations, reflecting a defensive strategy amid market uncertainty.

Dr James Cooke, deputy CIO at ARC, said: “This is the biggest negative sentiment quarter-on-quarter US swing we have seen since our Market Sentiment survey began in 2010.

“President Trump’s ‘Liberation Day’ tariffs threaten to damage sentiment further. Higher asset-price volatility ought to provide opportunities for active managers to demonstrate the value they can provide."

He added: "Those managers not making changes indicate that they intend to look through the Trump-induced volatility, believing tariff imposition may be temporary.”

www.assetrisk.com