Man on dollar cloud

Institutional investor confidence in the U.S. equity market weakened in June, according to new research from S&P Global Market Intelligence.

The rating agency reported that its latest survey of fund managers — which took place from June 3 to June 6 with almost 300 fund managers that collectively manage US$3.5 trillion — found that risk appetites have faded a bit from the previous month.

The shift came as investors’ return expectations for U.S. equities turned negative in June.

“After a brief surge to positive return expectations in May, investors adopted a more pessimistic stance in June,” S&P said, adding that investors’ views on equity fundamentals dropped in June.

The survey also found that investors see the global macroeconomic environment as a stronger driver of equity returns than the U.S. economy.

“A downward revision to first-quarter U.S. GDP and subdued growth expectations for the second quarter had contributed to investors’ waning confidence in the U.S. economy,” said Chris Williamson, executive director at S&P Global, in a research note.

“It certainly looks like the pace of expansion so far in 2024 has cooled from the strong rates seen late last year, which can in turn be linked to consumers reining in spending and borrowing amid higher interest rates and depleted savings,” Williamson added.

Amid the overall decline in investor sentiment, the financial, energy, and consumer discretionary sectors saw the biggest drops in investors optimism, S&P noted.

“Sentiment toward financials has slipped amid concerns over demand being subdued by higher-for-longer interest rates, as well as broader concerns regarding the pace of economic growth in the coming months,” Williamson said.

Conversely, investors’ views on the utilities and real estate sector improved in June, S&P said.