Have investors been selling, buying, or sticking with the US?

The big investment story of 2025 has been the drop in US equity prices, leading to questions about the end of US exceptionalism when it comes to investment markets.

Triggered by Trump’s Liberation Day tariffs, the S&P 500 fell nearly 20% from peak to trough. Due to a weakening dollar, the drawdown was more than 20% for UK-based investors.

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However, US equities have recovered nearly all their losses, as Trump announces trade war de-escalations, such as pauses on ultra-high tariff rates with China, as well as trade deals, such as with the UK.

Some investors argue we are witnessing the beginning of the end for US outperformance, with factors such as high levels of debt, expensive shares, and the rise of China all set to contribute to a long downturn for US assets.

On the other hand, more optimistic investors point to entrepreneurship and venture capital markets in the US, easing global trade tensions, and an abundance of high-quality businesses as reasons that US shares can go higher following recent falls.

But what does the data tell us about how investors are behaving with regards to the US?

• Is US stock market exceptionalism over?
• Investors buy the dip in US equities

The data shows that allocations to US equities in global funds have remained consistent since 2024 to the end of March 2025, at between 60% and 62.3%, according to fund data group Morningstar. This is despite the ebbs and flows of the US markets, as fund managers work to keep balanced portfolios.

The lowest monthly allocation was in August 2024, at 60.06%, with the highest in November 2024, at 62.34%. The allocation is 61% today.

This continued backing of US assets is supported by data from fund data firm Calastone, which found that UK-based investors are looking past the tariff turmoil and continued to buy US equities, even as economists forecast a recession in the world’s largest economy. 

It found that investors added a net £1.51 billion to their North America equity fund holdings in April. It said that the buying began in earnest on 8 April, just as the market began to speculate that President Trump was about to reverse his Liberation Day tariff schedule.

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Buying the dip has rewarded UK investors, as the S&P 500 has nearly recouped all its losses since the announcement of high trariffs at the start of April.

Other data suggests that investors have pulled money from US shares due to the tariff uncertainty. Bank of America’s survey of professional investors found that in April investors were “uber-bearish”, predicting a recession and increasing cash allocations.

In May it found that were still bearish and allocations to US shares dropped further, to their most underweight level in two years. Across regions, fund manager survey investors only increased allocation to Eurozone equities in May.

Investors are now neutral on tech stocks, but that is below typical overweight stance. Gold is the most crowded trade among professional investors, as they look for haven assets among the ongoing geopolitical and trade disputes.

The market competing most seriously with the US for investors’ assets this year is Europe, which has bounced back due to fiscal stimulus from governments and lower interest rates and inflation.

Marcel Stötzel, co-portfolio manager of the Fidelity European Fund, says: “Transformative developments include Germany lifting its fiscal debt brake, implementation of the Draghi report on European competitiveness, progress toward greater European integration, and potential mobilisation of Europe's record-high savings rates.

“While tariffs and recession risks could temporarily derail this positive trajectory, these structural improvements could drive GDP growth and close the productivity gap with the US over the next five to 10 years.”