Global institutional investors are increasingly pulling funds out of U.S. markets due to mounting concerns over trade policies and rising debt levels.
Recent reports indicate that the U.S. government’s unpredictable trade strategies have disrupted global markets, weakening the U.S. dollar and leading to underperformance in U.S. capital markets this year.
The Congressional Budget Office projects that the “Big and Beautiful” tax reforms will reduce U.S. tax revenues by $3.7 trillion and increase the deficit by $2.4 trillion over the next decade.
These economic factors have prompted investors to reassess their U.S. holdings. Last month’s Global Fund Manager Survey by Bank of America revealed that allocations to U.S. assets have hit their lowest point in nearly 20 years.
AllianceBernstein, managing nearly $800 billion in assets, noted that the current fiscal deficit is unsustainable. The uncertainty surrounding trade policies necessitates a reevaluation of heavy reliance on the U.S. market.
An executive from a major private equity firm expressed concerns that the U.S. government’s tariff policies have alarmed investors, making them cautious about over-dependency on U.S. assets.
Asset management firm Schroders has observed early signs of investors moving away from the U.S. market. Neuberger Berman reported a significant shift, with 65% of its private equity investments this year going to Europe, up from the previous 20-30%. The company attributes this change to growing uncertainties around U.S. domestic policies and tax reform risks, leading to a more cautious investment approach.
Furthermore, Canada’s second-largest pension fund, CDPQ, announced plans to reduce its exposure to U.S. assets—which currently make up about 40% of its portfolio—in an effort to mitigate risk.
With many institutional investors questioning the notion of “American exceptionalism,” a notable shift in global investment strategies may be reshaping financial markets worldwide.
