European equity funds saw their highest withdrawals since October 2023 last week

Funds that invest in European stocks saw their highest level of withdrawals in nearly a year, according to a new analysis from Bank of America (NYSE:BAC).

Investors have been documented to have withdrawn a whopping $2.4 billion from these mutual funds, the 12th straight week of net withdrawals and the largest amount withdrawn in a single week since October of the previous year, according to the bank's statement.

Bank of America said the measures have resulted in a total of $37.4 billion being withdrawn from funds focused on European corporate stocks since the start of the year.

Moreover, the majority of these recent withdrawals occurred in actively managed funds, which saw $1.66 billion withdrawn – the highest level in seventeen weeks – while index-tracking funds saw $0.73 billion out, only the second time this has happened in the past six weeks.

Bank of America noted that while undervalued stocks and Swiss companies saw modest inflows of $0.16 billion and $0.13 billion, respectively, other sectors struggled.

Sectors such as banks, UK and fast-growing stocks were the worst hit, with total withdrawals of $0.62 billion, $0.54 billion and $0.26 billion respectively. It is important to note that no industrial sector saw a net inflow during the week.

According to Bank of America analysis, their pattern cycle model currently points to a recovery phase starting in August 2024. However, the indicator that combines various economic signals for Europe has been in a downtrend.

The bank points out that this downward movement is likely to lead to the market changing into a recessionary phase in the following month if the current trend does not change.

The bank interprets these trends as indicating growing caution among investors regarding funds investing in European corporate stocks, reflecting broader concerns about the economic situation across Europe.

Given that no industrial sector is seeing net inflows and large withdrawals continue, Bank of America's assessment is that the overall market sentiment is moving away from Europe due to prevailing uncertainty.