End of the “Trump Trade”? Investors Accelerate “De-Americanization”

Trump's return to the White House once ignited global investors' enthusiasm for US assets, but this fervor is now reversing at a remarkable pace. Global capital is systematically avoiding the US market, rushing instead into European and Asian assets, as a profound global investment portfolio rebalancing is truly underway.

On February 25, Financial Times columnist Katie Martin pointed out that the US S&P 500 index has recorded a slight decline so far this year, while the global stock index excluding the US has risen as much as 9%, far outpacing the approximately 2% gain of the MSCI World Index that includes the US. This contrast makes it likely that this year could become the worst year for US stocks in terms of relative performance since 1995.

US tech stocks are under pressure, policy uncertainty continues to ferment, and the economic growth rate has slowed to a moderate annualized pace of 1.4%, all of which are jointly shaking the core appeal of US assets. Meanwhile, expectations of fiscal expansion in Europe are heating up, and signs of a turnaround in the German economy are making European assets the biggest beneficiaries of this round of capital reallocation.

Enthusiasm remains, but direction has shifted

The article points out that fund managers' overall enthusiasm for risk assets is currently on par with levels seen at the end of 2024 after Trump’s election victory; investors are not pessimistic, but rather, the focus of their enthusiasm has fundamentally changed.

At the end of 2024, market excitement centered on the new US government's expectations of deregulation and fiscal stimulus. At that time, the US dollar strengthened and US stocks led global markets, with the US seen as the engine that would "draw away" growth momentum from other developed economies. However, by the second year of Trump’s second term, this narrative has quietly collapsed.

Since the end of December last year, US stocks have fluctuated within an unusually narrow range, with neither a sharp decline nor a meaningful rally. Notably, even when Trump’s power was restricted (for example, his loss in last week's tariff lawsuit), the US market failed to rebound as a result. This detail indicates that the market's indifference is not simply due to policy concerns, but rather, a deeper shift in capital flows has already occurred.

Europe’s “Sleeping Beauty” Awakens

According to regular investor surveys by Bank of America Merrill Lynch, the current global investor overweight on eurozone assets has reached a record high. In a Europe-specific survey, more than a third of respondents said they hold an above-benchmark allocation to EU stocks, compared to just 9% three months ago. Meanwhile, a net 22% of respondents reported an underweight allocation to US stocks, while by the end of 2025 this figure was only 6%.

The article mentions that French asset management company Carmignac likens this phenomenon to the awakening of "Sleeping Beauty," believing that both structural and cyclical factors are jointly driving renewed favor for European assets. Large amounts of capital are flowing into European equity funds as investors seek both to diversify away from concentrated tech stock risk and to avoid the spillover effects of domestic political risk in the US.

The advancement of Germany’s large-scale fiscal spending plans has reignited market confidence in its economic outlook. While eurozone business survey data is not yet stellar, it is already showing signs of improvement.

Tech stock slowdown adds pressure to US assets

Analysis suggests that the core pillar supporting the US investment myth over the past decade—the outperformance of tech stocks—is being shaken. Although it remains unclear whether the recent pullback in AI-related stocks is a short-term fluctuation or a trend reversal, the market unease triggered by AI’s impact on the tech industry is accelerating the capital shift from the US to Europe.

At the same time, US economic data also shows signs of weakness. The latest annualized growth rate is only 1.4%, far below the previously expected robust expansion, and instead approaching Europe’s tepid pace. Financial Times commentary pointed out that the triple pressures of a tech stock slowdown, economic cooling, and political turmoil are together dealing a multi-pronged blow to the appeal of US assets.