Movement away from U.S Markets
Institutional investors are shifting away from U.S markets as trade wars and escalating debt fuel fear about the strength of American assets in portfolios. Erratic trade policy has shaken up global markets in the past quarter, sparking a sell-off of the U.S dollar. Uncertainty of when and by how much tariffs are going to hit has also fueled these concerns. Trump’s tax bill, which is forecasted to add to the total debt over the next decade, has also increased pressures on US treasuries. Experts have expressed concern that the U.S may hit a wall soon, as economic growth will struggle to keep up with additional debt added and payments required to manage debt.
The move away from U.S assets has helped European markets, as many institutional investors allocate capital overseas. The U.S has been one of the best places to invest across the globe, but recently it has been less than exceptional. Markets in Europe have seen growth due to multiple reasons.
Monetary Easing: The European Central Bank has aggressively cut rates, fostering cheaper borrowing, boosting lending, investment, and consumer spending. Lower inflation has allowed for this easing, with expectations of another cut later in the year.
Fiscal Stimulus & Infrastructure Spending: Germany revealed a $1 trillion fiscal package aimed at infrastructure and defense. The EU is also channeling over $100 billion in green and industrial projects. The EU is accelerating clean-energy projects through the Green Deal and building out renewable energy.
Strong Domestic Labor Market: The EU has experienced strong labor growth, posting over 1.7 million new jobs while unemployment remains stable at around 6%. This strength has propelled household spending.
Overall, EU GDP growth is projected to be around 1.1%, which is higher than in 2024. Investor confidence has returned in small/mid-caps and domestic investment into infrastructure and banks. This has sparked interest in many large fund managers in the U.S who are putting large investments overseas due to international growth and potential overestimation in the U.S market performance.