The big money is now going overseas

After a 2-year run in which American equities dominated the investing landscape, the pendulum clearly has begun to swing globally in the second half of 2013.

By MSN Money Partner Oct 14, 2013 3:23PM

Globe with money © PhotoAlto/SuperStockCNBCBy Jeff Cox


Big investors are putting their bets in for 2014, and so far it looks like the smart money is heading outside the U.S.


After a two-year run in which American equities dominated the investing landscape, the pendulum clearly has begun to swing globally in the second half of 2013 and more of that is expected in the year ahead.


Institutional investors responding to a Citigroup quarterly poll rated European stocks as the most-favored class, with Asia-Pacific coming in second and U.S. pulling up third.


"One of the biggest surprises was the belief that European equities would generate the best gains in 2014, overtaking the U.S. and emerging markets," Tobias Levkovich, Citi's chief market strategist, said in a note accompanying the survey. "This focus on Europe was fascinating in that this was the first time in the quarterly poll that such results were registered."


The surveys reflect recent money trends: Global exchange-traded funds took in $48.8 billion in the third quarter, while U.S funds attracted $31.5 billion, despite outperforming their counterparts around the world.


Interestingly, the slide away from American stocks came even though most respondents had a favorable view of the U.S. market and economy.


About half said they expected the S&P 500 to close above 1,800 (6 percent above current levels) and some 35 percent projected it to close above 1,850 (9 percent from Monday's trading).


Of course, either of those gains actually would represent a substantial slowdown from 2013's surge of more than 18 percent.


The survey provides at least one clue as to why enthusiasm has eased a bit on U.S. stocks: a slowdown in multiple expansion, or the growth in the price-to-earnings ratio.


Investors found the 2014 corporate earnings estimates of more than 14 percent growth to be too rich, expecting that the actual increase will be closer to 6.6 percent.


"This may reflect margin concerns but it is telling that 60 percent expect small caps to outperform now, representing the almost exact opposite position taken last year at this time," Levkovich said.


As far as other sectors, financials and industrials are expecting to perform best, while big dividend-payers are likely to be out of favor as interest rates increase.


Large investors expect benchmark U.S. rates to climb past 3 percent next year, a level where they also forecast growth in gross domestic product.


Though the survey did not address the issue, another factor likely tempering U.S. enthusiasm is the unwinding of the Federal Reserve's bond-buying program known as quantitative easing. The central bank is expected to begin pulling back the $85 billion a month program either late this year or early in 2014.


Consequently, institutional investors were clear on the two least-favored respective asset classes: Commodities and bonds.


More from CNBC

Oct 14, 2013 8:36PM

So we can conclude that our Government led by fearless leader empty headed Obozo and the Queen Yelen will be printing money hand over fist in order for the really rich folk to invest overseas. Overseas meaning Not in our Country!



Oct 14, 2013 10:40PM
Active RIA is right. Interest rate suppression Runaway money printing  World Central banks"have perverted the normal flows of currencies and markets"and slower or fast the WORLD going in one direction   AUSTERITY and a Damn Downward Spiral to poverty and bread and water if you are lucky..
Oct 15, 2013 9:31AM
The best worst scenerio.  The least worst or best worst doesn't matter.  Almost in perfect unison the high water mark in this American world market has been reached and now spilling out of the American market onto world markets.  The problem with this scenerio is that world markets have become much much less detached from the former American market.  I think most investors don't really see the detachment the author is attempting to create because they have little experience with these overseas markets.  We have a global economy with most big players entrenched in the smaller markets as well.  For most investors who are unfamiliar with smaller foriegn markets they can be duped into thinking there is a disconnect but that I believe will be filled in rapidly just by their sheer size.  So I would think by this time that difference is either very small or no longer exists.  In other words late to the party again. JMHO
With Congress holding our economy hostage, who is going to invest here?  There's no end in sight to our own government being the biggest roadblock to prosperity in America.  Sequestors and debt ceiling fights are killing us.
Oct 15, 2013 9:49AM

i'm seeing this thru my company 401K mutual funds.


the corporate "owner" is a britan corporation.  with sister comapnies in england and belgium - as well as us here in usa - we have mutual funds to pick from that are largely international in flavor. 


the funds have done very well the past few years.  but so has most anything else.  the tide rises all boats so they say. 


the key is when everything crashes.  who hits the bottom first? 

Oct 15, 2013 10:24AM

Only a few months ago, much of the big money was running to safety here in US investments...

In a month or two it may be the BRIC Countries?

Couple years back Commodities and PMs were the rage..

If action picks up in the Pacific Rim....A run back on Asian stocks will be the soup du jour...


Most of these locations are being propped by Central Banks or the IMF...

Just choose your investments wisely, with and eye on future events.

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