Investors are rapidly pulling out of U.S. stocks amid rising concerns over tariffs. A recent Bank of America survey reveals that global fund managers are significantly reducing their investments in American companies, marking the largest decline in U.S. equity allocation to date. This shift is driven by increasing doubts about the U.S. economic future as the Trump administration intensifies trade tensions with countries like Canada, Mexico, and China.
Analysts describe this trend as a reflection of "peak U.S. exceptionalism," with investors opting for cash, gold, and international markets, particularly in the Eurozone. Following a brief recovery, major stock indexes fell again on Tuesday. The S&P 500 dropped 60 points (1.1%) to 5,615, the Dow Jones Industrial Average decreased by 260 points (0.6%), and the Nasdaq Composite lost 305 points (1.7%).
Adding to market anxiety is the impending implementation of significant U.S. tariffs on April 2, including 25% duties on imports from Mexico and Canada, along with broader tariffs on other nations. Brian Coulton, Fitch Ratings' chief economist, highlighted the rapid escalation of tariff announcements since January.
The Organisation for Economic Co-operation and Development recently lowered its growth forecast for the U.S. and global economies, citing the threat of escalating trade conflicts. In the first quarter of 2025, the U.S. GDP grew at 1.2%, a slowdown from the 2.3% growth in the last quarter of 2024. Last year, the economy expanded by 2.8%, supported by strong corporate earnings, job growth, and consumer spending.
Analysts warn that President Trump's aggressive trade stance is not just a negotiating tactic but part of a broader strategy to bolster American industries and encourage domestic investment. The long-term success of this approach is uncertain, but for now, investors are cautious.
Market analyst Adam Crisafulli from Vital Knowledge advises investors to prepare for significant changes due to the trade agenda, which could cause substantial short- and medium-term disruptions. While there is potential for stocks to recover if tariff plans are reversed, only 11% of fund managers anticipate a severe economic downturn, according to BofA's survey.
Despite market volatility, Bret Kenwell, a U.S. investment analyst at eToro, points out that nine out of 11 S&P sectors are still performing well in 2025. However, the technology and consumer discretionary sectors have declined by 7% and nearly 12%, respectively. Kenwell suggests that the heavy losses in popular stocks may be skewing investor sentiment more than a typical market decline would. Historically, similar sentiment levels have often indicated a short-term bottom in U.S. stocks, though it's unclear if the market has reached a definitive low point.