According to a report by CCTV News, the US's aggressive trade policies are shaking the foundation of global markets. A recent article by CNN noted that although US President Donald Trump promised to usher in a "new golden era" for America, the once-prestigious investment hub is losing its luster.
The article cites the latest Fund Manager Survey by Bank of America, which shows that the number of global investors planning to reduce their holdings in US stocks has reached a record high since tracking began in 2001.
Arun Sai, Senior Multi-Asset Strategist at Pictet Asset Management, stated that Trump's trade policies have raised concerns about the US economy's growth prospects, prompting global investors to reallocate their assets away from US markets. He added that the damage caused by the trade war is substantial and irreversible. "Even if there is a steady de-escalation from here, the damage is done," Sai said. "There is no putting the genie back in the bottle."
Three factors driving global investors away
For years, the US stock market has been regarded as the gold standard for investors. Data shows that over the past 15 years, the S&P 500 consistently outperformed major indices in Europe and Asia. However, the index has fallen 10% this year, marking its worst monthly performance since 2022. This decline has made investors acutely aware of significant shifts in the market landscape.
Alessio de Longis, Investment Manager at Invesco, identified three catalysts that are redirecting investment focus away from the US and toward international markets:
- January: The rise of China's DeepSeek AI shocked Silicon Valley, shattering the long-held belief that the U.S. exclusively leads AI innovation.
- February: The US policy shift on Ukraine prompted Germany to increase defense spending, injecting fresh momentum into European economic growth and investment.
- March-April: The Trump administration's erratic tariff policies served as the final push, encouraging investors to explore alternative markets.
A survey by the American Association of Individual Investors revealed that over the past eight weeks, more than half of the respondents expressed a bearish outlook on US stocks.
Jason Blackwell, Chief Investment Strategist at Focus Partners Wealth, reported that client demand for international equities is at its highest level in 15 years. Blackwell noted that recent developments, including the rise of DeepSeek AI and Europe's growth outlook, have shifted investor attention. Events like tariff uncertainty have further driven a reevaluation of global asset allocations.
Ajay Rajadhyaksha, an analyst at Barclays, observed that the US market's two-decade-long "capital magnet" effect is waning, as global capital seeks new areas of opportunity. Rajadhyaksha highlighted examples of China's tech dominance, including Huawei's chip breakthroughs and BYD's electric vehicle success, which now rival Tesla. Additionally, recent government support for China's private tech firms has accelerated innovation.
Tariff policies undermine confidence in US assets
The article points to concerning market indicators: the US Dollar Index recently recorded its worst weekly performance since 2022, while the euro-dollar exchange rate hit a three-year high. Goldman Sachs analysts warned in a report that US asset returns, which have historically supported the dollar's strength, could be undermined if tariffs continue to erode corporate profits and real household incomes.
Krishna Guha, Vice Chairman at Evercore, stated that rising US Treasury yields coupled with a weakening dollar reflect a crisis of confidence in Trump's economic policies.
Arun Sai added that the Trump administration's efforts to reshape international trade and global economic order have reduced the appeal of US assets to international investors. While US equities remain a viable long-term option, uncertainties surrounding tariffs and economic policy have led investors to seek overseas opportunities to diversify risks.
For European investors, he emphasized, US assets are no longer the default choice, and the S&P 500 is no longer the sole benchmark for global investment.
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