Wall Street investors abandon U.S. assets in favor of European ones
European pension funds cut U.S. exposure, citing tariff risks and dollar decline.
βMajor U.S.Β financial institutions are reducing dollar holdings and shifting investments to Europe as political chaos and trade disputes under the Trump administration erode confidence in the Federal Reserve and U.S.Β markets.Β
The exodus is driven by falling U.S.Β stock prices and a 7% decline in the dollar since January, reports Cryptopolitan.
Analysts warn that the pullback could mark the beginning of a long-term retreat from U.S.Β assets, with European bonds and equities emerging as safer alternatives.
Pension Funds Lead the Exodus, ETFs See Record Outflows
European pension funds and asset managers are among the most aggressive in rebalancing portfolios away from US stocks and bonds. Finlandβs Veritas Pension Insurance Company cut U.S.Β exposure in Q1, citing tariff uncertainties, while Australiaβs UniSuper questioned its large U.S.Β asset allocation.Β
In Denmark, pension funds made their biggest European share purchases since 2018. Meanwhile, April saw β¬2.5 billion withdrawn from European ETFs holding U.S.Β assets, with May data indicating continued outflows.
Dollar Weakness Fuels Capital Flight, Hedge Demand Rises
The dollarβs slide is exacerbating the sell-off as institutional investors hedge against currency risks. Bank of America estimates that European investors would need $2.5 trillion to fully hedge currency exposure, potentially pushing the dollar even lower.Β
Californiaβs State Teachersβ Retirement System is also reconsidering its U.S.-heavy portfolio, warning that the Trump administrationβs tariff policies could prompt foreign trade partners to dump U.S.Β assets, further pressuring the dollar.
Recently we wrote thatΒ βthe European Union is taking formal steps to contest the United Statesβ imposition of tariffs on EU cars and car parts, announcing Thursday that it will file a case with the World Trade Organization.Β
