Global markets are experiencing significant turbulence as President Donald Trump’s assertive trade policies raise concerns about the continued appeal of U.S. investments. Despite Trump’s promise of ushering in a “new golden age of America,” the long-standing allure of U.S. markets is beginning to wane. Analysts suggest that Trump’s tariff strategies serve as a catalyst marking the end of U.S. exceptionalism, damaging its image as the premier investment destination.
The trade war initiated by Trump has introduced uncertainty into business decisions and muddied predictions for economic growth. This climate of unpredictability has led CEOs to reduce their forecasts, while Wall Street banks have lowered their year-end targets for the S&P 500. According to Bank of America’s recent global fund manager survey, there is an unprecedented number of investors planning to reduce their U.S. stock holdings, a trend not seen since the survey began in 2001. Notably, 73% of participants believe that American exceptionalism has hit its peak.
Arun Sai, Senior Multi-Asset Strategist at Pictet Asset Management, highlighted the repercussions of the Trump administration’s trade policies. “Even if there is a steady de-escalation from here, the damage is done. There is no putting the genie back in the bottle,”. The U.S. stock market, for years the gold standard of investment, is now witnessing a shift. The S&P 500, which has consistently outperformed its European and Asian counterparts for the past 15 years, is down 10% this year and is on track for its worst month since 2022.
Several factors are driving investors to look beyond America for opportunities, according to Alessio de Longis, head of investment solutions at Invesco. These include the emergence of DeepSeek’s cost-effective AI model, which has disrupted Silicon Valley’s dominance, the shift in U.S. foreign policy regarding Ukraine, and Trump’s inconsistent tariff approach. “The relatively erratic and unpredictable communication strategy around tariffs, as well as the initial shock of the amount of tariffs that were being threatened across the world provided another impetus for U.S. underperformance,” de Longis explained.
In response, de Longis has adjusted his investment strategy, moving from a U.S.-centric focus to a more balanced portfolio that includes European stocks. The American Association of Individual Investors reports that more than 50% of investors have been bearish on the U.S. stock market for eight consecutive weeks.
Jason Blackwell, an investment strategist at Focus Wealth Partners, noted a renewed interest in international stocks, a shift not seen in 15 years. “So, there’s definitely interest there again,” Blackwell commented, attributing this to advancements like DeepSeek and European growth prospects. “Add in the tariffs on top of that, and this de-globalization trend, and you have a series of events that really had investors rethinking their international exposures,” he said.
As of this year, the U.S. accounted for about 25% of global GDP and 65% of global stock market value, according to Barclays. “For nigh on 20 years, the U.S. has benefited from almost relentless flows into USD financial assets,” noted Ajay Rajadhyaksha, an analyst at Barclays. “Perhaps we were primed for some give-back … and a bunch of things have changed elsewhere.” He also pointed out that European fiscal stimulus and advancements in Chinese technology are creating new narratives for international investors.
Bank of America’s April survey revealed that 49% of respondents foresee a “hard landing” for the global economy, up from 11% in March. Gold has surged nearly 27% this year, becoming the most crowded trade, overshadowing the once-dominant tech stocks. Meanwhile, the U.S. dollar has weakened notably, suggesting diminishing investor confidence.
Goldman Sachs analysts pointed out that if tariffs adversely affect U.S. firms’ profits and consumers’ real incomes, they could erode the dollar’s valuation. Evercore ISI’s Vice Chairman Krishna Guha remarked on the market’s loss of confidence in Trump’s economic policies, citing higher Treasury yields and a weaker dollar.
Trump’s ambition for a domestic manufacturing renaissance could disrupt the global economy, a system where the United States has long held a central role. Sai from Pictet Asset Management anticipates that changes to the international trading system and economic orders spearheaded by the Trump administration may lead to reduced inflows into U.S. assets. While the U.S. stock market remains attractive for long-term investment, global investors are increasingly diversifying their portfolios with international stocks. JP Morgan forecasts a 60% likelihood of a global recession this year. “If you’re a European investor, you will now think twice about allocating strategically to the U.S.,” Sai concluded. “The S&P 500 is no longer the only game in town.”
Source: CNN
