Fund managers are becoming increasingly bullish on European equities, according to the latest iteration of Bank of America’s European Fund Manager Survey. European stocks have broadly enjoyed a significant rally this year, amid a diversification away from U.S. assets , the promise of massive fiscal stimulus in Germany , and a bull run in the region’s defense sector . Between July 4 and July 10, BoA polled 222 fund managers who collectively manage assets worth $504 billion. The findings, published Tuesday, showed that a net 81% of European investors see upside for European equities in the coming 12 months, with the proportion of managers overweight on the region — a net 41% of respondents — hitting a four-year high. Last month, 75% of fund managers told BoA they were forecasting upside for European stocks over the next 12 months. More than 20% of those invested in the region said they believed the upside for regional stocks in the coming year would be more than 10%. It’s important to note, however, that the survey was completed before U.S. President Donald Trump announced plans to slap 30% tariffs on goods imported from the European Union . Three-quarters of the fund managers polled told BoA that they believe German fiscal policy, European defense spending and further regional integration can end Europe’s structural underperformance. Fiscal easing was seen as something that should help “insulate the region from US headwinds.” Meanwhile, 23% of fund managers said they were underweight U.S. equities. According to the survey results, 63% of those surveyed are anticipating economic growth in the United States will slow in the coming months — but BoA’s strategists said in a note accompanying the findings that “Europe is seen as immune.” “[Sixty-three percent] think European fiscal spending will be impactful enough to lead European macro and markets to decouple from US policy headwinds, up from 25% last month,” they said. “This has also led investors to turn less sanguine on the European inflation outlook, with a net 4% seeing scope for European inflation to rise over the next twelve months, the highest since March 2022.” Where is the money going? When it comes to how fund managers are allocating capital to Europe, regional banking and technology stocks led the way, with more than one in five saying they were overweight on those sectors. European banks outperformed almost every other sector in the region in the first half of the year, with the Stoxx 600 Banks index gaining almost 30% in the first six months of 2025. Several European lenders, including Deutsche Bank and Barclays, hit decade-highs in recent weeks amid strong returns and a flurry of M & A activity. More than half of the fund managers surveyed by BoA said the European banking sector “still looks attractive after the strong rally.” Other European sectors favored by fund managers polled by BoA this month included industrial goods and services, insurance and construction. Around one in three European investors said they expected industrials to be the best performing sector in the coming 12 months, with one in four saying the same about financials. Meanwhile, 44% said they were expecting small cap stocks to outperform European large caps — a notable rise from the 7% who held the same view in June. At the other end of the scale, around 30% of fund managers told BoA they were underweight on Europe’s autos sector. Regional auto giants have been left reeling from Trump’s tariffs regime, with companies in the sector suspending financial guidance and already reporting drops in profit after the industry was hit by a 25% U.S. tariff back in April. The sector is one of the most exposed to U.S. tariffs on European goods, with the Stoxx Europe Automobiles and Parts index falling almost 3% so far this year. European retail, mining and media stocks were also among the most unloved sectors among fund managers in July, BoA’s survey results showed. Germany’s in, Switzerland’s out When it comes to individual countries in Europe, BoA noted that “Germany remains the most preferred equity market in Europe, followed by Italy, while Switzerland is the least preferred, followed by France.” Around 40% of fund managers named Germany as their preferred equity market in Europe. The country’s benchmark DAX index has surged almost 22% this year, thanks to major rallies among the likes of arms manufacturer Rheinmetall , up around 200% year-to-date, and Commerzbank, which has added 84%. Germany’s MDAX index, home to the country’s midcaps, has also added 22% since the beginning of 2025, lifted by a regional bull run in defense that has boosted German defense players Renk , Hensoldt and Thyssenkrupp by 310%, 204% and 182%, respectively. Meanwhile, around 40% of the fund managers polled by BoA said they were underweight Switzerland. Switzerland has come under pressure in recent months, as market volatility fueled demand for its safe haven currency — but a rising Swiss franc creates various challenges for domestic policymakers. Any intervention in the FX market, however, could cause contention in the U.S., where the government has placed Switzerland on a “Monitoring List” of trading partners “whose currency practices and macroeconomic policies merit close attention.” — CNBC’s Jenni Reid and Ruxandra Iordache contributed to this report.