European Investors Reassess U.S. Assets Amid Trump Administration Policies

The Trump administration's approach to globalization and trade has prompted a significant reassessment among European investors regarding their exposure to U.S. assets. U.S. Commerce Secretary Howard Lutnick characterized globalization as a "failed policy," while President Donald Trump predicted a doubling of the U.S. stock market, despite evidence suggesting that foreign investment, particularly from Europe, has been crucial in driving U.S. equity markets to record highs. Recent tensions, including Trump's threats of tariffs against European nations, have led to a noticeable shift in sentiment among investors, with many seeking to diversify away from U.S. equities.

Wall Street Grapples With New Risk: A European Buyers’ Strike

European investors currently hold approximately $10.4 trillion in U.S. stocks, with nearly half of that amount owned by investors from eight countries threatened by tariffs. This situation has raised alarms on Wall Street, as any significant withdrawal of European capital could adversely affect U.S. equities, bonds, and the dollar. Vincent Mortier, chief investment officer at Amundi SA, noted an increase in client inquiries about diversifying away from U.S. assets, a trend that has accelerated since April 2025.

Wall Street Grapples With New Risk: A European Buyers’ Strike

Historically, U.S. equities have outperformed their European counterparts, but this trend has shifted since Trump's inauguration. In 2025, the Stoxx 600 index surged by 32% in dollar terms, while the S&P 500 only increased by 16%. This performance disparity has prompted European investors to reconsider their U.S. holdings, with some, like Denmark's AkademikerPension, beginning to divest from U.S. Treasury bonds.

Wall Street Grapples With New Risk: A European Buyers’ Strike

In response to the evolving situation, European leaders have expressed the need for a coordinated approach. Ian Bond from the Center for European Reform emphasized that recent events have highlighted the fragility of transatlantic relations. Meanwhile, U.S. Treasury Secretary Scott Bessent dismissed the idea of Europe retaliating by selling U.S. sovereign bonds as illogical, despite market reactions indicating a growing unease regarding U.S. fiscal stability.

Selling US debt, Europe’s difficult weapon against Trump

Critics argue that Trump's aggressive trade policies and threats have eroded trust in U.S. financial markets. Raphael Thuin of Tikehau Capital noted that institutional investors are increasingly focused on diversifying their portfolios away from U.S. assets due to concerns about the "weaponization" of the U.S. dollar. Additionally, the Danish pension fund's decision to sell $100 million in U.S. bonds reflects a broader sentiment that U.S. government finances are unsustainable.

Wall Street Grapples With New Risk: A European Buyers’ Strike

While some analysts predict a significant shift away from U.S. assets, others maintain that foreign investor demand for U.S. equities remains stable. JPMorgan Chase strategists reported little change in foreign investor demand for U.S. equity funds, suggesting that any major outflows may not materialize in the immediate future. However, the potential for a longer-term adjustment in the weight of U.S. assets in global portfolios cannot be ruled out.

Wall Street Grapples With New Risk: A European Buyers’ Strike

As the midterm elections approach, the Trump administration may face pressure to temper its policies to maintain investor confidence. The ongoing geopolitical tensions and economic uncertainties will likely continue to influence European investors' strategies, prompting a gradual but notable shift in capital allocation away from U.S. markets.

‘Sell America’, the two words that sum up the markets’ break with an out-of-control Trump