In recent days, as Moody’s downgraded the US sovereign credit rating and the potential impact of the new spending bill on the federal deficit remained unclear, the “sell the US” narrative has resurfaced, dealing a severe blow to US assets.
Currently, this sentiment is growing among international investors. This month’s JPMorgan Global Markets Conference surveyed investors from 45 countries, and the results showed that they tended to be optimistic about Europe,with 36% expecting European equities to be the best-performing asset in 2025.
In contrast,only 17% bet on the US stock market to dominate.
A team of analysts from JPMorgan wrote in a report: “There are divergent views on the US economic outlook. Although a recession is no longer the base case, investors are not as optimistic about economic growth as the risk market exchange suggests.”
The report, which surveyed 700 investors from 45 countries, further indicates that after years of strong performance in the US market, global investors have become cautious about it.
Some analysts believe that while the US stock market has attracted a large number of foreign investors amid the market rebound over the past few years, high valuations, uncertainty about the prospects of artificial intelligence, and Trump’s “tariff stick” and its potential impact have shaken confidence in “American exceptionalism.”
Meanwhile, new favorable factors are emerging in the European market, with investors flocking to the region’s stock markets. The Stoxx Europe 600 index has risen 7% since the beginning of the year, while the S&P 500 has fallen about 1%.
Wall Street Still Stands Firm
Nevertheless, several Wall Street bigwigs still advise investors not to sell off US assets.
Morgan Stanley recently predicted that US dominance will last at least until 2026, as short-term volatility will give way to improved earnings sentiment, continued growth in artificial intelligence, and the boost from loose policies. In Morgan Stanley’s view, a slowdown in economic growth will not trigger a recession.
At the same time, Goldman Sachs also stated that US large-cap stocks will outperform the broader market again this year. The bank said that since 2023, the so-called “Magnificent Seven” have been the main growth engines of the S&P 500, and their current lower valuations will attract investors.
Uncertainty Remains
However, for now, uncertainty will continue to persist until the market becomes clearer on everything, including interest rates, the likelihood of a recession, trade agreements, and geopolitical developments.
JPMorgan Chase summarized some key issues from the meeting:
Recession:The probability of a US recession currently stands at 40%, but GDP losses have already occurred. Participants believe that US tariffs will undermine business investment and consumption. JPMorgan Chase expects that by the end of 2025, the yield on 10-year US Treasury bonds will reach 4.35%.
Trade negotiations imply more uncertainty:JPMorgan Chase stated that the easing of US-China trade tensions has boosted the sentiment of US investors, but the agreement with the EU appears to be controversial. If negotiations do not conclude smoothly, there is a high risk of retaliation from the EU. On Friday, Trump posted on Truth Social that he proposed imposing a 50% tariff on the EU starting June 1, amplifying the aforementioned risks.
Anticipation of prolonged bond selling:As inflation, attacks on central bank independence, and policy turmoil erode the safe-haven appeal of the US Treasury market, foreign selling of US Treasuries is expected to continue. JPMorgan Chase believes that the current situation will benefit gold.
“Merely shifting 0.5% of US overseas assets into gold could generate an annual return of 18%, with gold prices rising to $6,000 by early 2029,” the bank wrote.
(Source)