European Investors Accelerating U.S. Stock Allocations in 2024

U.S. investors may feel they have sufficient domestic exposure.

European investors are more readily including U.S. stocks within their portfolios versus U.S.-based investors so far in 2024.

According to data from Bloomberg Intelligence, 48% of all regional flows into U.S. equities came from Europe, contrasting starkly to 38% from U.S. investors.

This is equivalent to $7.4 billion in inflows from European investors so far this year, double that of U.S. investors who have poured in just $3.7 billion.

With the S&P 500 reaching 5,000 for the first time last week, U.S. investors believe they are fully allocated to national exposures while overseas buyers are more likely going to play catch up, according to Bloomberg Intelligence.

Compounding this was the notion that 80% of U.S. ETF assets are already made up of domestic exposures.

Additionally, data from French asset manager Amundi shows U.S. equity strategies remained among the most popular strategies for European investors, attracting inflows of €6.8 billion last month ($7.3 billion based on the current exchange rate).

3 S&P 500 ETFs

Supporting Europe’s huge portion of flows were three S&P 500 ETFs, with the iShares Core S&P 500 UCITS ETF attracting $2.6 billion of inflows last month, the SPDR S&P 500 UCITS ETF pulling in $922m of inflows and the Vanguard S&P 500 UCITS ETF posting impressive inflows of $620 million.

Pushing Europe to second place for U.S. stock allocation was Canada, which had 51% of its country's flows going into U.S. stocks.

Another point to consider in the U.S. equity story is concentration risks driving assets toward equal-weight S&P 500 ETFs.

After the Magnificent Seven of big tech stocks accounted for all gains in the S&P 500 in the first five months of 2023, European investors have been much more selective of how they gain exposure to U.S. equities. The U.S.-listed Invesco S&P 500 Equal Weight ETF (RSP) to book its biggest week of inflows since its inception, adding $1.7bn assets.

Furthermore, the Xtrackers S&P 500 Equal Weight UCITS ETF (XDEW) saw $2 billion in inflows in 2023 amid investor concerns over potential overconcentration risks.