The Financial Times reported on the 5th that uncertain trade policies and rapidly rising government debt have shaken investor confidence in U.S. assets. Major global investment institutions are reducing their exposure to American holdings and reallocating capital to Europe and emerging markets. A fund manager survey released by Bank of America last month showed that allocations to U.S. dollar assets have fallen to their lowest level in nearly two decades. According to France’s Le Monde, investors are pulling more and more capital out of the U.S. market, signaling a major shift in the global financial landscape. This wave of capital outflows is not just a routine market adjustment — it’s a reassessment of the United States’ position in the global economy.
Smart Money Makes Its Move
The Financial Times noted that in recent months, the U.S. government’s erratic trade policies have rattled global markets, with U.S. stocks underperforming European equities by a wide margin this year. Meanwhile, the U.S. dollar index has slipped from around 110 at the start of Trump’s second term to below 100. The dollar’s decline has given global investors yet another reason to avoid U.S. Treasuries. The Wall Street Journal reported that the weakening dollar — along with the rising cost of hedging currency risk — is making U.S. assets less attractive worldwide. This comes as an added blow to the U.S. Treasury market, which is already under pressure from bleak fiscal outlooks and trade tensions.
Against this backdrop, asset managers are rethinking their strategies. Major institutions including Caisse de dépôt et placement du Québec (CDPQ) and Oaktree Capital have started trimming their U.S. exposure and turning to more stable markets like Europe. Peter Harrison, CEO of the UK-based investment firm Schroders, noted: “We’re seeing investors steadily pull back from U.S. investments.” Howard Marks, co-founder of Oaktree Capital, which manages $203 billion in assets, has also started to question the U.S. market’s position. He pointed out that while the U.S. has been the world’s premier investment destination for over a century, investors are now challenging the notion of “American exceptionalism” and reconsidering their portfolios.
The City A.M. reported that an increasing number of clients are asking investment giant Goldman Sachs to pull funds out of the United States. Kara Gibson, head of Client Solutions at Goldman Sachs, said: “People no longer see the U.S. as safe and dominant the way it once was.” When asked whether clients are actively moving to reduce exposure to U.S. investments, Gibson replied: “That’s what everyone’s thinking.”
At the same time, the U.S. government’s “Big and Beautiful” tax plan has further heightened market concerns. According to the Financial Times, the tax reform bill championed by Donald Trump is projected to add $2.4 trillion to Washington’s debt over the next decade, putting even more strain on U.S. Treasury bonds. The Nikkei Asian Review noted that until recently, global capital had been flocking to U.S. mega-cap tech stocks and corporate bonds in pursuit of high returns. But growing concerns over the U.S. economic outlook and fiscal situation are now pushing more investors to diversify their assets across regions.
Ma Wei, a researcher on U.S. economic issues at the Chinese Academy of Social Sciences, said on June 8 that after the U.S. government announced a “reciprocal tariffs” policy on April 2, the U.S. market experienced a rare “triple whammy” — simultaneous drops in stocks, bonds, and the dollar. That pattern has reemerged in recent days. This is forcing large institutions to ask a key question: Are dollar-denominated assets still a safe haven? These institutions, representing what the market calls “smart money,” are the first to sense shifts and react quickly. Their exit from U.S. markets suggests they genuinely perceive growing risks in dollar assets.
Europe and Emerging Markets Absorb the Outflow
As capital exits the United States, where is it going? According to the Nikkei Asian Review, Europe, Japan, and emerging market countries have become key destinations.
Canada’s Caisse de dépôt et placement du Québec (CDPQ) recently announced that to reduce risk exposure, it will cut back on U.S. assets, which currently account for about 40% of its portfolio, and increase allocations to markets in the UK, France, Germany, and other parts of Europe. U.S.-based Neuberger Berman reported that 65% of its private equity co-investments this year have gone to Europe, significantly higher than the typical 20% to 30%. Yanni Skaff, head of European private equity at the firm, said: “Interest in Europe is rising, and it’s not just about tariffs. Europe’s macro environment may not be better than the U.S., but it’s more stable. What’s driving non-U.S. investors isn’t only the trade war — domestic instability in the U.S. and proposed tax reforms also matter.” Blackstone Vice Chairman Tom Nides also commented that shifting funds to Europe is far from a bad move, given the relative political stability in the region.
Some European politicians are seizing the moment to court investors. London Mayor Sadiq Khan told CNBC in a recent interview that he hopes to attract U.S. businesses to invest in the UK. Amid rising uncertainty from the U.S. government, he said he’s appealing to investors, tourists, and students seeking alternatives — emphasizing London’s strengths in stability, openness, and diversity.
Emerging markets are also gaining traction with investors. Nikkei Asian Review reports that stock index movements clearly show capital flowing into these countries. Brazil’s Bovespa Index hit a record high on May 20, and South Africa’s All Share Index reached a new high on May 23. According to Reuters, emerging market equity funds are among the best performers globally this year. Data from the London Stock Exchange Group shows that funds tracking Latin American stocks are up about 24% this year, while broader emerging market equity funds have gained 9.3%. In the first five months of the year, emerging market equity funds attracted $10.6 billion in inflows — a 43% increase over the same period last year.
Explaining this trend, Nikkei Asian Review notes that the U.S. Dollar Index has been declining since early 2025. As investors pull away from U.S. assets, a weaker dollar benefits emerging market governments by easing their dollar-denominated debt burdens, and helps companies by lowering dollar funding costs. In addition, expectations of improving credit ratings and financial conditions among emerging market governments and firms are drawing fresh capital.
Bloomberg reports that the dollar is currently near a two-year low. Wall Street banks, including Morgan Stanley and JPMorgan, expect further weakening due to potential interest rate cuts, slower economic growth, and ongoing policy uncertainty. This could accelerate the shift of capital from U.S. assets to emerging markets.
Reuters notes that rising tech stocks have boosted mainland Chinese and Hong Kong markets, drawing foreign investors interested in AI and other tech sectors. Allison Shimada, portfolio manager at Symmetry Investments, said that despite trade tensions, countries like Mexico and Brazil remain resilient, offering investment opportunities. “The Chinese consumer story is especially compelling. Beijing is focused on stimulating consumption. While Indian stocks may be overbought, sectors like power utilities and non-bank financials still have potential.”
Morgan Stanley has again voiced a bullish stance on Chinese equities. On June 6, Wang Ying, the bank’s China equity strategist, stated that a weakening dollar, fading belief in “American exceptionalism,” and growing investor appetite for diversification will drive more inflows into Chinese stocks over the next 6 to 12 months. Jiang Guangzheng, Chief Investment Officer for China at HSBC Global Private Banking & Wealth, said Asian markets continue to attract capital thanks to strong structural growth and diverse local opportunities, with China, India, and Singapore standing out for their economic resilience. Ma Wei added that under extreme U.S. tariff pressure, China has maintained stable and consistent policies, and its economy has shown remarkable resilience — surprising many international institutions. As a result, they are raising their expectations for the Chinese market and reallocating assets accordingly.
“U.S. Treasuries Have Become a Source of Chaos and Concern”
Al Jazeera reported on the 7th that for decades, U.S. Treasury bonds were considered a safe haven during times of crisis and served as a cornerstone of global capital markets. However, confidence in this once-reliable financial instrument is now waning, with ripple effects spreading across global markets and continents.
The latest report highlights that America’s widening fiscal deficit, deepening political divisions, and declining investor confidence are all pushing U.S. bond yields to unprecedented levels. This has sparked a serious debate about the future of the U.S. dollar as the world’s primary reserve currency. U.S. Treasuries are no longer seen as the stabilizing “pillar” of global finance — instead, they have become a focal point of disorder and anxiety, shaking the confidence of investors and policymakers alike.
Ying Xiwen, an analyst at Minsheng Bank International, noted in a recent research report that after a rare simultaneous plunge in U.S. stocks, bonds, and the dollar in April, another “triple slump” occurred at the end of May. A series of events suggest signs of growing “de-dollarization” in market behavior: Moody’s downgraded U.S. sovereign credit outlook, leading to weak demand at a 20-year Treasury auction, while the “Big and Beautiful” tax bill may further strain the federal deficit. On top of this, erratic U.S. trade policies are creating an increasingly unstable external environment.
According to Ying, history shows that stagflation, a crisis of confidence in the dollar, and trade wars are the breeding ground for such triple-market shocks — all of which now describe the macro backdrop in the U.S. The warning signs for another round of stock-bond-currency decline are still flashing.
Al Jazeera reported that some economists are calling this moment the “Great U.S. Treasury Crash.” It’s not merely a market volatility episode, but a structural and geopolitical crisis. The turmoil in bond auctions, capital flight, and growing doubts about the dollar’s reserve currency role are no longer fleeting concerns — they may signal the end of one era and the beginning of another.
Ma Wei noted that although concerns over U.S. debt are not new, growing evidence suggests a fundamental shift could be underway. The U.S. government is now nearing a breaking point in debt sustainability — interest payments have surpassed defense spending and are approaching Social Security outlays, a situation never seen before. Long-term Treasury yields exceeding 5% are fueling deep market unease.
Ma also pointed to another major shock: U.S. policy choices are causing the market to question whether the dollar can continue to function as a global currency. Under these pressures, large institutional investors are increasingly compelled to reassess risks and reallocate assets accordingly.
“It’s difficult to say with certainty whether dollar-denominated assets — especially Treasuries — have definitively lost their status as the world’s safest investment,” Ma said. “But the signs are mounting that such a fundamental turning point is becoming more and more likely. If the status of Treasuries is shaken, the dollar’s role as an international currency will follow — and with it, the erosion of America’s financial dominance.”
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