Fund managers have grown so bullish on European equities in the last month that a "contrarian" sell signal has been triggered, according to research by the Bank of America Merrill Lynch.
A total of 235 panelists with $643 billion of assets under management participated in a global survey for the BofA Merrill Lynch Global research report. When asked about equity allocation for Europe, a net 46 percent of asset allocators are overweight European equities, up from a net 36 percent September and representing the highest reading since 2007.
"The rise in allocation triggers a contrarian sell for EU stocks," a team of strategists led by European Investment Strategist John Bilton said in the BofA Merrill Lynch Fund Manager Survey for October.
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Bilton added in press conference on Thursday that this is the first "potentially overbought" signal for a region since December 10, a time when emerging markets showed the same warning signals and sold-off around eight months later.