Last week, investors staged a historic shift into equities. Global equity inflows were $22.2 billion, marking the second-largest week in history.
Long-only equity mutual funds, a common instrument for retail investors, had their biggest week since March 2000, and emerging market equity funds recorded their biggest inflows ever.
Interestingly, though, while the pros are buying up stocks, they're not buying stocks in the United States.
In fact, according to BofA Merrill Lynch's monthly fund manager survey, released today, investors are underweight U.S. stocks for the first time in 18 months (click to enlarge):
BofA strategist Michael Hartnett writes, "In our view, investors are counting on EM, Europe, and Japan to outperform US equities should risk assets continue to rally in Q1."
Sure enough, allocations to emerging market stocks are up this month. Investors are now a net 40 percent overweight, up from 38 percent last month:
Investors are net 15 percent overweight eurozone stocks, the highest since January 2008. However in Europe, Hartnett notes that "current allocation is just 0.2 standard deviations above its 10-year average, far from overcrowded."
Meanwhile, investors are now net 3 percent overweight Japanese stocks, the first positive weighting since July 2011.
Hartnett writes, "We note that this level of overweight is modest by historical standards. Allocation averaged net 31 percent overweight from 2003-07, which suggests Japan allocation has more room to grow.
Meanwhile, investors' allocation to cash and bonds fell to their lowest levels since early 2011. So, the U.S. starts the year slightly out of favor.
More From Business Insider