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US stocks dumped amid Trump tariff fears
Uncertainty over trade policy rattles investors as European markets rally, with Germany announcing a €500bn investment and climate fund
US stocks dumped amid Trump tariff fears
Uncertainty over trade policy rattles investors as European markets rally, with Germany announcing a €500bn investment and climate fund
www.thetimes.com
Investors are dumping American stocks in favour of European equities at the fastest pace in 25 years amid fears about the impact of President Trump’s policies on the world’s largest economy.
Fund managers expect the US economy to slow sharply this year, triggering the fastest rotation out of the American stock market in favour of Europe since comparable records began in 1999, according to a survey of money managers by Bank of America.
Declining consumer confidence, rising inflation expectations and policy uncertainty in the US has rattled investors and raised the odds of a recession in an economy that grew by 2.8 per cent last year, the fastest rate in the G7. By contrast, European stocks have enjoyed their best start to a year since the mid-1980s, buoyed by cheap valuations, falling interest rates and Germany’s push for mass rearmament and investment.
European stocks rallied on Tuesday after two thirds of Germany’s Bundestag approved the creation of a €500 billion investment and climate fund and a weakening of the country’s strict debt brake to allow for near unlimited defence spending.
Robin Winkler, chief economist at Deutsche Bank, said the spending plans marked a “historic fiscal regime shift, arguably the largest since German reunification … Yet, as with reunification, a fiscal expansion does not guarantee success. The next government will need to deliver structural reforms to turn this fiscal package into sustainable growth.”
Germany’s Dax was the biggest climber, gaining 0.8 per cent, followed by France’s Cac 40, which gained 0.4 per cent. The FTSE 100 was up 0.2 per cent and the FTSE 250 rose 0.4 per cent.
The flight from US equities continued on Tuesday. The benchmark S&P 500 closed down by 1.1 per cent while the technology-heavy Nasdaq lost 1.7 per cent in New York.
US equities have suffered the brunt of the asset switch from American assets, with the S&P 500 falling by 10 per cent from a peak reached earlier this year, a decline that marks the start of a market correction. There have been only 12 occasions where a stock market recession did not lead to a wider economic recession in the US since 1990.
Just under 40 per cent of fund managers said they were holding overweight positions on European equities this month, up from 12 per cent in February and the largest share in four years. UK stocks have also benefited from the shift out of the US, recording the highest fund manager capital allocation since 2021.
Just under a quarter of the same money managers said they were holding fewer US stocks — an “underweight” position, according to the survey.
The outlook for growth also fell, with investors’ expectations of rising global GDP this year falling from -2 per cent to -44 per cent on the back of fears about the US.
Bank of America said global growth projections fell at the second-fastest pace on record in March and more than half of investors (55 per cent) believed that a “recessionary trade war” was the biggest threat to the world economy.
Trump’s officials have dismissed falling stock market prices and vowed to push ahead with more tariffs on US trading partners next month. Scott Bessent, the US treasury secretary and most senior economic policymaker in the administration, said this week that stock market corrections were “normal” and “healthy”.
