Traders rethink US market supremacy

A rebound on Wall Street and in the dollar has not allayed investor concerns about the ability of US assets to outperform overseas markets, even as a string of trade deals struck by the Trump administration sufficiently perked up sentiment for equities to set record highs.

- CAROLINA MANDL SUZANNE MCGEE DAVIDE BARBUSCIA

The sliding dollar, down about 8% this year against a basket of major currencies, and the ballooning fiscal deficit are shaking the conviction that US financial markets will deliver world-beating returns.

For more than a decade, the concept of “American exceptionalism” — the belief that the United States’ democratic system plus its huge and liquid capital markets offer unique rewards — has been little challenged by investors. But ongoing uncertainty surrounding tariffs is rattling confidence.

While the deals struck by Donald Trump with the European Union, Japan and South Korea have delivered some relief, the US president had set Friday as a final deadline to either reach trade agreements with other major trading partners or impose new tariffs unilaterally. On Friday, Trump announced a one-week extension.

A market shakeout earlier this year caused by Trump's first tariff announcements triggered a reevaluation. The US market's standing appears “a little bit bruised,” said Lori Heinel, global chief investment officer at State Street Global Advisors.

“The overhang of the [government] debt makes it less attractive to have dollar-based assets,” she added.

In a survey conducted in late May and June, market research consultancy CoreData found that many institutional investors and consultants, collectively overseeing $4.9 trillion in assets, are scaling back exposure to the US. Among respondents, 47% are cutting their strategic, long-term allocations to US markets.