President Donald Trump’s aggressive trade policies have shaken global markets and pushed investors to look beyond the US for more stable opportunities. Despite his promise of a “new golden age of America,” the appeal of US investment is starting to lose its luster. Trump’s tariffs have been a catalyst for the end of an era of US exceptionalism.
His trade policies have clouded business decisions and disrupted forecasts for economic growth. CEOs have slashed guidance and Wall Street banks have cut their year-end targets for the S&P 500 as a result. “The damage is done,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management.
“There is no putting the genie back in the bottle.”
The US stock market has long been a global benchmark, with the S&P 500 consistently outperforming its counterparts in Europe and Asia over the past 15 years. Yet, the S&P 500 is down 10% this year, on track for its worst performance since 2022. There have been three key catalysts that have shifted focus away from America and toward investing overseas, according to Alessio de Longis, head of investments at Invesco.
First, in January, DeepSeek’s low-cost AI model challenged the narrative that the US had outright dominance in AI.
Trade policies influence global investments
Second, in February, a shift in US foreign policy towards less support for Ukraine spurred defense spending in Europe, proving to be a boon for economic growth in the region.
Third, Trump’s unpredictable approach to tariffs has been another nudge for investors to look at other markets. The latest data from the American Association of Individual Investors showed that for the past eight weeks, more than 50% of respondents have been bearish on the US stock market. Jason Blackwell, chief investment strategist at Focus Partners Wealth, highlighted increasing client interest in international stocks, marking a significant shift from a consistent focus on US stocks over the past 15 years.
Bank of America’s fund manager survey in April revealed that 49% of respondents believe the global economy is on track for a “hard landing.” Gold, a traditional safe haven, has soared almost 27% this year, breaking record highs. Meanwhile, the US dollar has weakened broadly, a potential sign of waning investor confidence. “We have previously argued that exceptional US asset return prospects are responsible for the dollar’s strong valuation,” analysts at Goldman Sachs wrote in a recent note.
“If tariffs weigh on US firms’ profit margins and US consumers’ real incomes, like we think they will, they can erode that exceptionalism and, in turn, crack the central pillar of the strong dollar.”
Trump’s trade policies, aimed at reshaping the international trading system, have likely contributed to fewer inflows to US assets. JPMorgan estimates a 60% chance of a global recession this year. While the US stock market remains a viable long-term investment, the uncertainty introduced by Trump’s trade policies has led investors to consider global alternatives.
The shift in sentiment suggests that the US may no longer hold the uncontested position it once did in the investment world.
