Investment industry shuns US stocks amid Trump tariff threat
Investors are finally pulling back from US stocks amid uncertainty over president Donald Trump’s looming tariffs and potential for better gains in Europe and the UK.
A survey of investment management CIOs from Asset Risk Consultants (ARC) found that a third of wealth managers slashed exposure to the US throughout the last quarter.
Sentiment among the CIOs was four per cent net negative to US assets, down sharply from 36 per cent net positive a year ago.
This compared to a smaller drop in sentiment towards equities overall, from 40 per cent to 29 per cent net positive.
While many investment firms made no changes to their portfolios over the last year, those that did primarily reduced exposure to US stocks, especially large cap and tech stocks.
“This is the biggest negative sentiment quarter-on-quarter US swing we have seen since our Market Sentiment survey began in 2010,” said ARC deputy CIO James Cooke.
However, analysts have been keen to note that Trump’s tariffs have not been the only reason for a pivot away from the US.
Allianz has described this rotation away from American markets as a “vibe shift,” with Europe and the UK finally challenging the supremacy of the few US tech stocks.
With Trump’s return to the White House, many investors were expecting a repeat rally in US equities in the early days of his first term as president in 2017.
Instead, US markets have seen their worst performance in years, while European and UK equities have surged.
“With the turn in consumer confidence and other predictive economic measures, we are starting to see the uncertainty taking a toll on the economy and markets,” said Christopher Rossbach, CIO at J Stern & Co.
While Trump’s imminent tariffs have caused some concern, other factors, such as Deepseek challenging the American AI leaders and the high multiples of US shares, have also been a concern for stock pickers.
After years of European and UK stocks underperforming compared to their American counterparts, investors are starting to believe in a resurgence for the continent.
“We think the rally in European equities has further to go,” said Virginie Maisonneuve, global CIO of equities at Allianz.
However, others have cautioned to ignore the temporary damage that Trump may be inflicting on the markets in favour of the US economy’s strong fundamentals.
“Investors have to accept that uncertainty is what Trump does, but they should think long-term and remember that quality companies will continue to be quality companies and the laws of economics have not been suspended,” argued Rossbach.
“Our task as long-term investors is not to predict what politicians do but to focus on the fundamentals.”