US markets trailing the world as the aura of America First fades

Investors have a growing list of reasons to look elsewhere as mood sours in the US

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Across financial markets, America is no longer first. Just weeks ago, investors were hailing US President Donald Trump's return to the White House as a reason to bet that his blend of tax cuts and tariffs would supercharge economic growth, in turn boosting US stocks and the dollar at the expense of international peers. The so-called Trump trades were on.

Now that mood has quickly soured. The President's on-again, off-again trade war, aggressive posture towards Ukraine and a wave of government cuts driven by Mr Elon Musk have united with a suddenly weakening economy to undermine sentiment. The Trump bump is now the Trump slump.

Accelerating the shift away from US assets: Germany's plan to massively increase spending, announced last week, is being lauded as a sea change in European policymaking, lifting the region's stocks, currency and government bond yields. Meanwhile, the emergence of artificial intelligence start-up DeepSeek in China is raising questions about America's supremacy in the technology sector.

Add it all up, and the aura of US economic and market exceptionalism, which dominated for more than a decade, is looking shaky. The once-unstoppable S&P 500 Index, less than a month removed from a record high, just logged one of its worst weeks of underperformance relative to the rest of the world this century.

The US share of world market capitalization has also slipped since peaking above 50 per cent early in 2025.

Elsewhere, the US dollar has started to weaken after posting its best quarter since 2016, and a chorus of bearish voices towards the greenback is expanding. That has happened as Treasury yields have tumbled on bets that the economy is stumbling and will require more support from the US Federal Reserve.