As 2025 draws to a close, there’s one trend investors are sure to follow into the new year. That is a growing reluctance to go all-in on U.S. assets. It all started in April, when U.S. President Donald Trump’s so-called “Emancipation Day” sent markets into a frenzy, selling off U.S. stocks, government bonds, and the dollar. This deal became known as “Sell America,” and in some circles as “ABUSA,” an acronym for “Anywhere But the USA.” In the intervening months, a series of policies were announced and then rescinded, resulting in the “TACO” (Trump Always Chickens Out) deal. “The average investor has too much money sitting in the U.S.,” Dave Nadig of ETF.com told CNBC last month. “More and more investors are hearing talk of some form of exit from the United States.” “Trump Dump” Daniel Coatsworth, head of markets at AJ Bell, said foreign investors remain interested in portfolios that are not dominated by U.S. stocks, even though Wall Street’s major averages have rebounded since the tariff panic and hit multiple all-time highs. U.S. trade policy triggered the first phase of what Coatsworth called the “Trump dump” — a trend that continues, but is evolving, he argued. “We’ve seen an increase in these global funds excluding the US,” he explained. “Many retail investors would just buy a global fund every month and just want to get broad exposure.[But]now we’re seeing people discovering these funds where they can actually buy global funds, but they don’t include the US. So they’re still getting very broad exposure to different countries, but they’re intentionally excluding the US.” Many global benchmarks suggest that international stocks have outperformed the U.S. stock market so far this year. The MSCI World ex USA index, which tracks large- and mid-cap stocks from 22 developed markets outside the United States, is up 24% since the beginning of the year, compared to the S&P 500’s gain of about 15.6% since the beginning of the year. Coatsworth argued that two factors are likely causing investors to reduce allocations to U.S. assets. “In part, they may feel they already have enough exposure,” he told CNBC. “They don’t want to keep increasing their wealth, because the U.S. is a big part of the global stock market. And the other reason is probably because they don’t like what’s going on in the U.S.. Some people don’t agree with the way the government is run. There’s actually been a bit of a rethink in terms of whether or not we have the money.” As the White House’s unpredictable policies continue to shake up markets in October, questions continue to arise about U.S. stock valuations and whether they’re in an AI-driven bubble. “One of the concerns for our clients is that the U.S. stock market is extremely concentrated, especially compared to Europe, which is more diversified,” Christoph Schoen, head of investment decision research at Danish investment management firm SimCorp, told CNBC. He cited seven so-called Magnificent stocks (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla) that account for about a third of the S&P 500’s market capitalization. “These are concentrated in three areas: information technology, communications services and consumer discretionary, all of which are highly cyclical,” said Sean. “In contrast, the top 10 stocks in the STOXX Europe 600 account for 17% of market capitalization (half of Mag7), dominated by companies in the technology, healthcare, energy, financials and consumer sectors.” Luis Lau, investment director at California-based Brandes Investment Partners, said he also sees evidence that demand for international assets remains strong. “Brandes has seen the largest inflows into our international (non-U.S.), small-cap and global strategies this year,” he told CNBC. “While international stocks have been the biggest source of inflows to Brandes, investors are still putting money into U.S. stocks, but with a tilt in value, either with a focus on small-cap stocks or as part of a more diversified global portfolio.” “Hedging America” But not everyone agrees that investors are broadly diversifying away from the United States. Amol Dhargarkar, managing partner and chairman of risk management advisory firm Chatham Financial, told CNBC that his experience with this trend is more in line with the idea of ”Hedge America.” “Some of the policies that the U.S. administration has put in place have indirectly led to selling pressure on the dollar,” he said in an interview in London last month. Nick Niziolek, co-chief information officer at Illinois-based Calamos Investments, added, “I haven’t seen the concept of Sell America yet, and others have said so, but it’s probably more of a ‘Hedge America,'” adding that investors are generally happy with the huge allocations to U.S. assets. “In my view, interest in the[non-U.S.]asset class ‘peaked’ shortly after the U.S. stock market pullback in April, when investors began to notice the outperformance of foreign risk assets and some investors began to rebalance their portfolios,” he told CNBC. “As the U.S. stock market has recovered, my sense is that most investors are satisfied with the high returns they have experienced thus far.” However, he noted that there are differences of opinion between U.S.-based and international investors. “My sense is that this is a different experience for foreign investors,” he said. “European investors who invested in the S&P 500 this year could have returned 14% year-to-date, but at the same time the euro rose 12%, so the net return was only (about) 2%,” he said in October. “Had they kept their funds domestically, the MSCI Europe Index would have returned 14%, and they would have also benefited from a 12% appreciation in their local currency against the US dollar.As a result, asset allocation decisions have become more important for international investors, and as a result, we believe more investors are keeping their incremental investment funds domestically and investing in domestic markets.”
