US equities are expected to be the worst performing sector over the next 12 months, fuelled by high valuations of tech stocks and the risk of a possible correction, according to a survey by Research in Finance.
A survey of 204 investment trust investors found 29% of respondents believe the US will fare worst, followed by 26% who said property would be worst performing.
However, despite fears of a ‘tech bubble’ in the US, technology is still expected to be the best performing sector over the coming year, according to one in three respondents (31%). It was followed by global equities (24%) and the UK (22%).
There has been a shift from growth to value among private investors in investment trusts, although growth remains the more popular approach, the research showed. More than a third (37%) of respondents favoured a value style, up from 27% last year, while 42% preferred growth, down from 51%.
One investor told Research in Finance: “Because of economic slowdown I favour the value approach since last year but I am not keeping my eyes shut on growth. I am very much interested in growth in the technology sector.”
Nick Britton, research director of the Association of Investment Companies, said: “Investment trust investors are still fans of the tech growth story, but some are clearly becoming nervous about having too much exposure to highly valued parts of the market.
“While they aren’t necessarily slashing their US exposure, they are certainly warming to a number of sectors that have been out of favour but where recent performance has picked up, including the UK, Europe and emerging markets.”
Oliver Crawford, research manager of Research in Finance, added: “Investment trust holders are growing increasingly cautious about overconcentration in US stocks. While they aren’t abandoning US equities altogether, concerns over the high valuations of technology shares and a possible correction are prompting a shift.
“Our research shows that investors are now actively looking to rebalance towards other regions, with the UK and Europe gaining notable favour compared to a year ago. Investors are also telling us that they are becoming more interested in investment trusts with a ‘value’ approach, as they see these as offering greater stability and resilience.”
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