President Trump has vowed to usher in an era of American exceptionalism through policies prioritizing the United States over other nations.
However, the initial actions taken by Mr. Trump during his presidency have had a counterproductive effect on the American stock market.
The S&P 500, which had consistently outperformed global stock indices, is now lagging behind major markets in Europe and China, as investors shift their funds away from the United States and diversify worldwide.
Since Mr. Trump’s inauguration, the S&P 500 has decreased by 6 percent, while Germany’s Dax index has increased by 10 percent, and the Europe-wide Stoxx 600 index has risen by over 4 percent. Other U.S. indices have performed even worse, as European markets have gained momentum due to increased military spending prompted by Mr. Trump’s insistence that those nations take more responsibility for their defense.
The Hang Seng Index in Hong Kong has surged more than 20 percent since Mr. Trump took office in January, fueled by the Chinese government’s economic stimulus actions. Mexico’s IPC index, which is focused on domestic performance and resilient against Mr. Trump’s significant tariffs, has risen by 5 percent.
As American markets are buffeted by uncertainties surrounding Mr. Trump’s tariff strategies and severe federal budget cuts, investment advisers have begun directing clients toward other global markets.
“It’s definitely time to explore options outside of the U.S.,” stated Jitania Kandhari, deputy chief investment officer at Morgan Stanley Investment Management. She remarked that she has observed an increase in discussions with clients eager to broaden their investment in international stocks.
Even global markets that have experienced declines have managed to outperform the S&P 500. The FTSE All-World index has dropped 2.9 percent since the inauguration, hindered by U.S.-listed stocks. Canada’s TSX index decreased by 2 percent, while Japan’s Nikkei 225 fell by 3.6 percent.
Recently, Wall Street has circulated numerous bank research notes, client presentations, and trading recommendations suggesting a shift away from U.S. investments.
“Acknowledge resilience, reconsider U.S. exceptionalism, and be cautious of policy disruptions,” read the title of one such presentation from Bruce Kasman, chief economist and global head of economic research at J.P. Morgan.
Market strategist Brad Rutan from MFS Investment Management noted that he also envisions prospects outside the United States. “It’s fair to say there is ample opportunity for international equities right now.”
In the past week, investors withdrew funds from U.S. stock purchasing for the first time this year, according to EPFR Global’s weekly data through Wednesday. The withdrawal amounted to a modest $2.5 billion, contrasting with roughly $100 billion that flowed in during the initial nine weeks of 2025.
While some traders react quickly to market news, others, particularly those expecting long-term investments, like pension funds or university endowments, may take months to adjust their portfolios.
“After such a prolonged U.S. outperformance relative to Europe, such a drastic turn cannot happen overnight,” observed Greg Boutle, head of U.S. equity and derivative strategy at BNP Paribas. “Many investors may not have reallocated yet.”
Should investors persist in withdrawing funds from U.S. stocks and directing them towards foreign markets, it could exacerbate the selling pressure that recently pushed the S&P 500 into a correction, defined as a decline of more than 10 percent from its peak.
Given the vast size of U.S. markets, a complete exodus of foreign investors is nearly impossible, according to Ms. Kandhari, “but the shift can certainly generate market fluctuations.”
This withdrawal follows years in which the U.S. stock market was regarded as the envy of the globe, drawing foreign investors seeking better returns than those offered by their domestic markets.
Approximately $420 trillion flowed into funds investing in U.S. stocks in 2024, as per EPFR Global data, contributing to the rise of major indices and supporting the growth of several prominent technology firms. Roughly two-thirds of the FTSE All-World Index’s valuation is attributed to U.S. stocks, with nine of the top ten largest stocks in the index originated from the United States.
In the year leading to the presidential election, the S&P 500 outdid many global indices, registering a 32 percent increase, while Germany’s Dax experienced a 27 percent rise.
Despite the current fluctuations, many investors remain optimistic about U.S. stocks in the long run and believe they will eventually outperform their international counterparts.
While government expenditures in Europe may increase, potentially spurring growth, this surge could stem more from a sense of impending conflict rather than sustainable economic productivity. Furthermore, if the U.S. enters a recession, it is improbable that the rest of the world would escape its repercussions.
“Ultimately, I believe this uncertainty will resolve, leaving us with a U.S. that retains advantages not found in Europe and other nations,” said Paul Christopher, head of global market strategy at the Wells Fargo Investment Institute.
Other investors are contemplating whether this moment might signal the beginning of a significant shift, potentially ending the long-standing trend of U.S. dominance in financial markets.
“I believe that conversation is taking place,” Ms. Kandhari mentioned.
