A growing number of global investors are cutting their exposure to the US stock market, citing a combination of high valuations, political instability, and concerns over American foreign policy.
For some, a recent comment by Donald Trump referring to Canada as the ’51st State’ was the final straw.
‘It was the dagger in the heart,’ said Keith Moffat, a Netherlands-based investor with Canadian and Irish citizenship to WSJ.
Moffat, who once held 90 percent of his portfolio in US stocks, said he sold all his American holdings in recent weeks, redirecting his funds into international exchange-traded funds (ETFs) and European defense stocks.
‘Why would we keep our money in a market that’s becoming more unpredictable by the day?’ Moffat asked.
The shift comes as markets outside the US, particularly those in Europe and Asia, appear to be outperforming expectations in early part of this year.
The S&P 500 has declined 3.6% so far this year, while Europe’s Stoxx 600 is up 8.3%.
Germany’s DAX has surged nearly 15%, boosted in part by a €1 trillion fiscal injection targeting defense and economic stimulus.
While some US investors remain hesitant to look abroad, citing unfamiliarity with foreign markets, the shift is gaining momentum. Pictured, traders work on the floor at the New York Stock Exchange on Friday
Investors say the market move is not solely about returns.
Moffat said Trump’s remarks characterizing Canada as the ’51st state’ angered many international investors.
‘There are a lot of Europeans with money who are upset over what’s happening in the US. Why would we put our money there?’
The market reaction reflects a broader unease with US policy.
President Trump’s planned reciprocal tariff regime, set to take effect April 2, and his ‘America First’ foreign agenda are fueling fears of rising global trade tensions and weakened transatlantic alliances.
‘This is not a minor reallocation. It’s a sentiment shift,’ said Lia Holmgren, a Miami-based trader originally from Slovakia who advises retail investors.
Holmgren said she moved some of her short-term assets out of US markets in February and into European defense firms.
‘Everyone invests in US stocks – it’s where the best companies are. But the valuations are insane. What’s the future of those companies?’
For some, a recent comment by President Trump referring to Canada as the ’51st State’ was the final straw. Trump is seen pictured alongside former Canadian Prime Minister Justin Trudeau
US equities still trade at a premium compared to most international markets.
The price-to-earnings ratio for the S&P 500 is 24.6, compared to 18.7 for the Stoxx Europe 600 and under 13 for Hong Kong’s Hang Seng Index, according to Dow Jones Market Data.
Morningstar reports that in January and February, investors added more than $2 billion net into US-based ETFs that invest predominantly in European equities.
It’s a stark reversal from the second half of 2024, when those same funds saw $8.5 billion in net outflows.
Some investors also cite personal and geopolitical risk in their decision to shift portfolios.
Peter Stern, a 41-year-old American living in Germany and working for a US-based tech company, said he reduced his US exposure over fears of financial uncertainty tied to diplomatic strain.
‘I’m spending euros, I’m making euros, and all of my money is trapped in the US,’ Stern said.
‘I no longer feel safe leaving my money in the US – not all of it.’
Stern said he has begun converting his US bond holdings into European equities, despite tax complications.
Like others, he is particularly focused on defense-related stocks, which have gained traction across Europe as NATO-aligned countries increase military spending.
While some US investors remain hesitant to look abroad, citing unfamiliarity with foreign markets, the shift is gaining momentum.
This screenshot from Donald Trump’s Truth Social account shows an AI-generated image of President Trump standing beside a Canadian flag
‘There are opportunities elsewhere,’ said Thomas Cooper, a 34-year-old entrepreneur in Ohio who trades daily.
While he hasn’t pulled his money yet, he’s watching closely. ‘I don’t blame anybody. I see the all-time highs overseas.’
Despite the pressure, some investors remain committed to US markets long-term.
Andrew Barnett, based in Queensland, Australia, has cut his US holdings in half, but hasn’t exited entirely.
‘You’ve got 27 countries in the EU,’ he said. ‘You’ve got 27 different cultures and languages and retirement ages.
‘I think the US will always outperform Europe. But during certain periods, like right now, we’re going to see little pockets of opportunity.
For now, market watchers are bracing for what comes next.
US economic data due this coming week – including producer prices, durable goods orders, and consumer sentiment could either steady investor confidence or deepen the exodus.
