The smart money turning its back on the U.S. as the S&P 500 flirts with all-time highs could soon be hit with pangs of regret.

Hedge funds’ skepticism toward this year’s dizzying bull run is easy to see among clients of Credit Suisse Group AG’s prime brokerage.

Their gross exposure to American equities relative to global allocations is the lowest since the middle of last year even as the S&P heads for its fourth straight month of gains and low volatility gives bulls fresh ammo.

Fast-money traders have tilted toward Asia for “higher-beta” names closely tied to the overall index, and to Europe for cheap valuations.

They’ve shown “a clear antipathy” for U.S. stocks in 2019, according to Mark Connors, global head of risk advisory at Credit Suisse.

The question now is how long that can last, as the fear of missing out overwhelms amid extended gains in the U.S. market, while earnings estimate revisions appear to have bottomed.

Think Again

“The consensus underweight in U.S. equities across all strategies may be short-lived if the favorable response to U.S. earnings continues,” Connors wrote in the report. “Rewarded for embracing European exposures in Q1, the tactically-oriented manager must now determine the benefits of renting (short-term) or owning (long-term) these names after their well-timed commitment to European equities in the face of political risks.”

Their reward has been a 4.6 percent gain in March, registering in the top decile for systematic and discretionary macro funds going back to 1994, according to the report. Equity long-short funds were up 6.4 percent in 2019 as of April 12, while quantitative or market-neutral funds rose 3 percent and commodity trading advisers gained 4.7 percent, Credit Suisse data show.

And there’s still a case for taking more risks beyond America, especially for stock pickers. As global shares bounced back toward the end of 2018, gains in the Hong Kong and Chinese markets towered above most others amid optimism over China’s economic recovery and trade talks with the White House.

In Europe, sentiment is so bearish that being long has turned into a contrarian trade -- exactly what hedge funds might favor. To illustrate: long-short funds’ net exposure to European financial stocks -- chronic underperformers -- are almost 20 percent, while in the U.S. the percentage is about half of that, Credit Suisse data show.

Yet there are signs hedge funds are tip-toeing back to U.S. stocks. Their net exposure to the U.S. relative to global stocks has started to rebound from a multi-year low, suggesting interest in a “catch-up trade” may be growing, Connors said.