During the recent meeting in Davos, US Secretary of Commerce Howard Lutnick stated that the Trump administration views globalization as a policy that has not brought success to America. Shortly thereafter, President Donald Trump claimed that the US stock market will continue to grow, attributing its success to his leadership.

However, there is a contradiction between these statements. In recent years, it has been international investors—especially from Europe—who played a key role in reaching record highs in the US stock market, which Trump often highlights as his achievements.

Main news from Bloomberg
Despite recent attempts by Trump to reduce tensions with Europe, concerns remain on Wall Street that his confrontational approach could prompt major European investors to cut their investments in US stocks. The first signs of such a shift are already visible.

Vincent Mortier, Chief Investment Officer at Amundi SA—the largest asset manager in Europe—noted: “We are seeing more and more clients seeking opportunities to diversify outside the US. This trend started in April 2025 and has only intensified recently.” He emphasized that abandoning US benchmarks and hedging against the dollar will be a long and complex process for clients.

Currently, European investors hold approximately $10.4 trillion in US stocks, with more than half of this amount belonging to investors from eight countries that Trump threatened with tariffs. This rhetoric contributed to a 2.1% decline in the S&P 500 on Tuesday.

In comparison, Europeans account for 49% of all foreign-held US stocks—a significant portion that could influence the market, notes Scotiabank strategist Hugo Ste-Marie. He warns that accelerating diversification could, over time, exert downward pressure on US stocks, bonds, and the dollar.

Although it is unlikely that European countries will coordinate a mass exit from US assets, ongoing threats and criticism from Trump have led many asset managers across Europe to increasingly receive questions from clients about reducing their US holdings.

Changing Investment Models
For many years, abandoning US stocks would have been a losing strategy, as US securities consistently outperformed other developed markets in terms of returns. But with Trump in office, the dollar weakened, and European governments increased spending. Over the past year, the Stoxx 600 index rose 32% in dollar terms, the Japanese Topix increased 23%, and South Korea’s Kospi surged 80% compared to a 16% rise in the US benchmark. The Canadian S&P/TSX Composite outperformed the S&P 500 by the largest margin in two decades, even without considering currency fluctuations.

JonesTrading’s chief market strategist Michael O’Rourke noted: “If I were a European investor, I would consider opportunities outside the US, given our current exposure.”