Big investors shift away from US markets: It is “a wake-up call to a lot of people that they were overweight the US”

A top executive described Trump’s ‘liberation day’ as ‘a wake-up call to a lot of people that they were overweight the US’
Photo: FT

Big institutional investors are shifting away from US markets as Donald Trump’s trade wars and the country’s escalating debt fuel fears about the dominance of American assets in global portfolios, writes ‘Financial Times’.

The US president’s erratic trade policy has shaken global markets in recent months, sparking a sharp sell-off in the US dollar and leaving Wall Street stocks lagging far behind European rivals this year.

Trump’s landmark tax bill, which is forecast to add $2.4tn to Washington’s debt over the next decade, has also increased pressure on US Treasuries.

“People need to rethink” their exposure to the US, said Seth Bernstein, chief executive of AllianceBernstein, which manages $780bn in assets.

“The deficit has been out there as an issue; it’s just getting worse,” he added. “I think it is untenable for the United States to continue borrowing at the pace it’s borrowing …  When you couple that with what’s going on with the unpredictability of our trade policy…  It should cause people to pause and consider: how much do you want concentrated in one market?”

A top executive at a big American private capital firm described Trump’s so-called liberation day, when the president unveiled sweeping tariffs on Washington’s trading partners, as “a wake-up call to a lot of people that they were overweight the US”.

“The US has been the best place in the world to invest for a century, but I’m starting to hear investors question whether US exceptionalism is a little less exceptional, and think about whether to position their portfolios accordingly,” Howard Marks, co-founder of $203bn alternatives manager Oaktree Capital Management, told the Financial Times.

The dollar is close to a three-year low — down 9 per cent this year — even though Trump has retreated on many of the tariffs he initially announced.

Investors say that the global dominance of the US economy and the depth of its capital markets mean it will remain the premier destination for global investment.

However, many are questioning whether more than a decade and a half of inflows and outperformance — which pushed the US share of global equity market value to around two-thirds by the start of this year — is headed into reverse.

“We have started to see the early signs of investors shifting away from the US,” said Richard Oldfield, chief executive of UK asset manager Schroders.

“Europe still has sclerotic growth and a very high level of regulation, and China is still complicated,” said Oaktree’s Marks. “Where else can large amounts of capital be deployed?”

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