Investors worldwide are shifting their focus to European and Asian stocks as uncertainty around President Donald Trump’s economic agenda grows. The largest drop in allocation to US stocks on record has been recorded, according to a Bank of America survey.
US exceptionalism may have peaked, analysts say, contributing to the shift. Investors have become increasingly uncertain about the stability of US markets due to Trump’s approach to trade and foreign policy. This sentiment is reflected in the latest data from the S&P 500 index, which has lost around 4% this year, lagging behind global indexes such as China, Europe, and Mexico.
The US outlook is at odds with market demand for certainty and stability. Peter Ricchiuti, senior professor of finance at Tulane University’s Freeman School of Business, states that the US “has been [the place] everybody wanted to put money into.” However, recent data highlights a divergence in investor sentiment, with an index measuring economic policy uncertainty by month spiking in March.
Recent market downturns have also been attributed to Trump’s tariffs and immigration policies. FedEx, for instance, has seen its share price drop 6.4% after slashing its guidance and lowering its forecast for profits this year. Major US companies are signaling turmoil ahead, with analysts attributing the market instability to a haphazard implementation plan of Trump’s policy agenda.
In contrast, European stocks have emerged as relatively stable from an investment perspective. The Trump administration’s shift on foreign policy toward Ukraine has prompted Europe to focus on defense spending, boosting forecasts for economic growth in Germany. The country’s DAX index has soared 15% this year.
While some analysts see the Trump policy as slightly isolationist, offering compelling economic benefits for investors internationally, others believe it may be underpinning a broader shift away from US exceptionalism. The S&P 500 and Nasdaq both fell into correction territory this month, with tech stocks sputtering to start the year. The Chinese government’s response to Trump’s tariffs has also seen stocks surge in China, with Hong Kong’s Hang Seng index gaining 18% this year.
Despite these concerns, TradeStation’s David Russell emphasizes that the US economy is still stronger than Europe’s and more reliable than China’s. However, the first few weeks of Trump’s second term have been a far cry from the pro-business boom investors expected when he was reelected in November.
Source: https://edition.cnn.com/2025/03/21/investing/foreign-markets-outpace-us-markets-trump/index.html