Scepticism about US tax reform plans, and pricey valuations after a record rally, kept European money managers wary of North American equities in April, while a hectic election calendar has also reduced the lure of euro zone assets.
Participants in Reuters' survey of 14 European asset managers were keener on emerging markets, noting recovering economic growth across the developing world.
The survey was conducted between April 18 and 25, mainly in the run-up to the first French election round. That was topped by centrist Emmanuel Macron, sending French stocks to record highs and sparking equity rallies world-wide.
Macron is now expected to win the May 7 run-off - a relief for investors who had fretted about a possible victory for the right-wing Marine le Pen who has threatened to take France out of the euro.
Meanwhile, strong company earnings and potential tax cuts for corporate America sent world stocks to record highs, with New York's Nasdaq surging above the 6,000-mark for the first time ever.
European asset managers' overall equity holdings inched up to 44 percent, the highest since January. This was mainly thanks to UK allocations rising to 7 percent, off the recent seven-year low of 4.7 percent. They also increased emerging equities to at least 14.1 percent versus 12.7 percent in March.
Japanese holdings rose to 8.5 percent, a three-month high.
US equity exposure however was steady at 39.6 percent, the lowest since December, while European holdings slipped four percentage points to 30.8 percent after a spike last month.
"We are underweight US equities as the United States has the highest valuations while it is also the region where the soft versus hard data conundrum is the most pressing," said Peter van der Welle, a strategist at Robeco.
Mixed US economic data has made analysts sceptical the country can achieve targeted 3 percent growth this year or next, even if the fiscal stimulus and tax cuts promised by US President Donald Trump are implemented.
Trump has proposed tax cuts, but his package has fallen short of the comprehensive reforms sought by businesses and wealthy taxpayers, while it also faces a long road to enactment. Some of his other promises, including repealing the previous administration's healthcare reform, have run aground.
Over two-thirds of poll participants who replied to a special question on the subject said they did not expect major US tax reform to be accomplished in 2017.
"After the healthcare debacle, it is hard to see Washington neophytes like (Treasury Secretary Stephen) Mnuchin push a complex tax reform proposal through a polarised Congress before 2018," van der Welle said.
This could check the exuberance of US equities despite robust company earnings and a broadly healthy economy.
Matteo Germano, global head of multi asset investments at Pioneer Investments said he favoured Europe and Japan versus the United States, "which has already benefited from re-pricing amid expectations of pro-market policies".
But others were less keen on Europe, noting political volatility stemming from politics. Besides the French May 7 run off, Britain goes to the polls in June, Germany in September and Italy in early 2018.
The euro surged to 5-1/2-month highs against the dollar after the French election round, but earlier this year it hit lows around 1.03 per dollar, leading many to predict the single currency would hit parity against the greenback.
But only one poll participant expected parity to be reached. Others such as Jan Bopp at Bank J Safra Sarasin said the euro-dollar rate would reflect the decrease in French political risks on the one hand and receding US stimulus hopes on the other.
"In the case of a Le Pen win in France, euro-dollar could trade below parity. But this is not our base case," he said. "On the other side, possible reflationary aspects of Trump's proposed policies boosting the US dollar are fading away."
That also made it likely that markets would price out some near-term US rate rises, Bopp added.
The poll reflected growing interest in emerging markets, with 80 percent of respondents predicting more flows to the sector. Bank of America Merrill Lynch data showed last week that emerging bond funds had taken new money for 12 straight weeks.
MSCI's emerging equity index gained 11 percent in the first quarter and is set to end April up another 2 percent, having surged towards a two-year high after the French vote.
"Emerging markets equity valuation remains attractive and emerging debt also brings an attractive carry," Nadege Dufosse, head of asset allocation at Candriam, said.
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