Remember that feeling of invincibility the US stock market had? The one where it seemed to defy gravity, logic, and every bearish prediction thrown its way? Well, according to the folks who talk to the people actually moving the money, that era might be coming to a close.

A closely-watched survey from Bank of America, a true pulse-check on the mood of professional fund managers, is sending a pretty clear message: the consensus is that the US stock market’s long-standing outperformance is officially over. It’s not necessarily predicting a catastrophic crash, but it is signaling a major shift in where the smart money thinks the best opportunities will be hiding from here on out.

This isn’t just a few Wall Street pessimists grumbling into their coffees. This survey is a big deal. It polls hundreds of fund managers who collectively oversee over half a trillion dollars in assets. These aren’t amateur retail traders; these are the seasoned pros making billion-dollar bets. And right now, they’re looking at the US market like a party that’s run its course, and they’re starting to call for their coats.

The Survey Says: Time to Look Elsewhere

So, what exactly are these managers saying? The data paints a stark picture. A net 21% of respondents are now betting that US stocks will underperform other markets around the world in the coming year. That’s the most pessimistic reading on US equities we’ve seen since way back in November 2020.

Think about what was happening in November 2020. We were in the midst of a global pandemic, vaccines were just a hopeful headline, and the world economy was on life support. For fund managers to be this down on US stocks now, in what is supposedly a more stable environment, tells you something significant has changed in their calculus.

But it’s not just a simple case of “America, bad.” The survey also shows a massive surge in optimism toward other regions. A record number of investors are piling into European and emerging market stocks, seeing them as more attractively priced and better positioned for the next phase of the global economic cycle. They’re essentially doing the investment equivalent of selling high and looking to buy low somewhere else.

Why the Cold Feet Toward the US Market?

You don’t just fall out of love with the world’s largest, most liquid, and most innovative stock market overnight. This shift in sentiment is being driven by a cocktail of concerns that have been simmering for a while and are now coming to a boil.

First and foremost, let’s talk about the elephant in the room: valuation. The US market, particularly the tech-heavy Nasdaq, is expensive. Like, “priced-for-perfection” expensive. For years, investors were willing to pay a premium for the explosive growth promised by American tech giants. That group, the infamous “Magnificent Seven,” carried the entire market on its back.

But that trade is getting crowded. The future growth is already baked into the current share prices, and then some. Any stumble in earnings or hint that the AI revolution might take a breather could send those high-flyers tumbling back to earth. Fund managers are looking at those sky-high price tags and deciding the risk/reward calculation just isn’t in their favor anymore.

Then there’s the Federal Reserve. For over a year, the market has been obsessed with the timing of interest rate cuts. The entire rally since late 2023 was built on the hope that the Fed would soon ride to the rescue and start lowering borrowing costs. But inflation has proven to be a stickier houseguest than anyone hoped, and the Fed’s message has become a frustrating, endless loop of “not yet.”

The “higher for longer” interest rate reality is a direct headwind for US stocks. It makes it more expensive for companies to borrow and invest, and it gives investors safer alternatives for their cash, like bonds that now offer decent yields. The longer rates stay high, the more the US market’s foundation of growth-at-any-price gets wobbly.

And we can’t ignore the global picture. While the US has been surprisingly resilient, other parts of the world are starting to look more interesting. China, despite its well-documented property crisis and economic headaches, is so cheap that some investors see it as a classic contrarian play. The Chinese government is also starting to roll out more serious stimulus measures, which could provide a jolt to its markets.

Meanwhile, European stocks are trading at a significant discount to their US counterparts. You’re essentially buying similar global companies for a lot less. For value-minded investors, that’s an irresistible opportunity. It’s like choosing between two identical bottles of wine—one with a 50% discount. The choice becomes pretty easy.

The Great Rotation: What Are They Buying?

This isn’t a story of investors fleeing stocks altogether and hiding in cash. It’s a story of a “Great Rotation” out of US equities and into other areas.

Emerging markets are a huge beneficiary of this shift. The thinking goes that as the US dollar eventually weakens on the prospect of future rate cuts (even if they’re delayed), it will provide a turbo boost to emerging market economies and their companies. A weaker dollar makes their dollar-denominated debt easier to service and their exports more competitive. It’s a bet on a mean reversion trade that has played out many times before.

Within the US market itself, the survey shows managers are also rotating within sectors. They’re moving away from the once-loved tech sector and into more defensive, value-oriented areas like cash, commodities, and healthcare. They’re preparing for a period of slower growth and higher volatility by battening down the hatches.

This is a classic late-cycle move. When the growth engine starts to sputter, you don’t want to be holding the most speculative assets. You want to own things with real, tangible value and reliable dividends. The fact that fund managers are making this move en masse is a powerful signal of where they think we are in the economic cycle.

Is This Time Different? The Bull Case for the US

Now, before you go and sell all your US index funds, it’s worth noting a counterargument. The US market has a habit of making pessimists look very, very foolish. It’s the king of a plot twist.

The US still boasts the deepest capital markets, the most innovative companies, and a corporate culture geared towards shareholder returns. The AI revolution, while perhaps overhyped in the short term, is a very real long-term productivity driver that could continue to benefit US companies disproportionately.

Furthermore, a strong US economy, while keeping the Fed hawkish, is also good for corporate profits. American consumers have been remarkably resilient. If companies can continue to deliver strong earnings, they can justify their lofty valuations and prove the doubters wrong. It’s a big “if,” but it’s certainly within the realm of possibility.

The survey, remember, is a measure of sentiment. And sentiment can be a fickle thing. It can change on a dime with a single positive inflation report or a dovish comment from a Fed official. The crowd is often right at the turning point, but it’s also famous for being early.

What This Means for Your Portfolio

For the average person, this isn’t a signal to make panic-driven moves. Trying to time the market based on a survey, even a reputable one, is a fool’s errand. However, it is an incredibly useful reality check and a reminder of some core investing principles.

First, it reinforces the critical importance of global diversification. Having all your eggs in the US basket has been a winning strategy for over a decade. This survey suggests that strategy may be due for a break. A well-balanced portfolio with exposure to international and emerging markets is the best way to hedge your bets and ensure you’re not missing out on the next wave of growth, wherever it may be.

Second, it highlights the value of not chasing performance. The US market has been the star, and the natural human instinct is to pile into what’s working. But investing is about looking forward, not backward. The sectors and regions that have underperformed often become the next leaders. This survey is a clear warning against getting caught up in the euphoria and paying too much for past performance.

Finally, it’s a lesson in tuning out the short-term noise and focusing on the long game. Market leadership rotates. It always has and it always will. The key is to have a strategy that is built to weather these shifts, not one that needs to perfectly predict them.

The Bank of America survey isn’t a crystal ball, but it’s a powerful snapshot of professional sentiment. And right now, that sentiment is shouting that the easy money in US stocks has been made. The next chapter of the market is likely to be more complicated, more global, and require a more nuanced approach. The era of US exceptionalism in equities is taking a bow, and the rest of the world is waiting in the wings for its turn in the spotlight.