According to Geoff Yu at BNY, despite a perceived loss of some 'U.S. exceptionalism,' there has not been a broad exodus from U.S. assets by cross-border investors [1]. Instead, these investors continue to maintain high allocations to U.S. equities, particularly driven by strong performance in technology and AI sectors [1]. The data cited in the report indicates that the share of U.S. equities in non-U.S. portfolios has risen sharply, nearing year-to-date highs [1].
In contrast, holdings of U.S. Treasuries have been trimmed within sovereign-bond portfolios, a move attributed to curve steepening and the associated increase in duration risk [1]. Despite this reduction, total Treasury positioning among this investor group remained above the lows seen in early July, even a week after the Federal Reserve's recent decision [1].
The report emphasizes that U.S. asset positioning is expected to remain structurally firm, with a growing preference for equities over Treasuries [1]. Investors are advised to retain equity exposure while managing Treasury duration more actively, as curve steepening and fixed-income volatility continue to present challenges [1].
Overall, the technology and AI narrative is seen as a key driver supporting U.S. equity allocations, and the 'sell America' theme is reportedly discussed more often than it is actually implemented in portfolios [1].
CONCLUSION
BNY's analysis suggests that global investors are favoring U.S. equities, especially in technology and AI, over Treasuries due to duration risk and curve steepening. U.S. asset positioning is expected to remain robust, with equities likely to outperform fixed income in the near term.