Well, it’s official: US equity exceptionalism’s over. Time of death: March 2025 or, less than two months into Donald Trump’s new American “golden age.”
In this case, “official” just means confirmed by BofA’s closely-watched monthly fund manager poll, the latest edition of which found PMs trimming their US equity allocations faster than Elon Musk firing bureaucrats and cutting life-saving foreign aid programs.
Specifically, PMs slashed their allocations to US shares by a rib-tickling 40ppt from February to March amid a nauseating swoon for America’s previously insouciant benchmarks which’ve struggled mightily to cope with the return of a mercurial president who, for now, is willing to do what many thought was anathema to his personal constitution: Let stocks fall in the ostensible pursuit of a greater “good.”
There’s the chart. FMS panelists were 17% Overweight US shares in February, now they’re 23% Underweight, all thanks to “Tariff Man” and his penchant for capricious absurdity.
So, if fund managers were trimming their US allocations, what were they buying? Put differently: If they were rotating out of the US, what were they rotating into?
The short answer’s Europe. Allocations to the bloc’s equities are now the highest in four years thanks to a remarkable about-face, illustrated below.
The survey period ran from March 7 to March 13. The S&P fell more than 4% over that stretch, adding to a downdraft that had already shaved 6% from the world’s risk asset benchmark par excellence.
“Peak US exceptionalism is reflected in a record rotation out of US stocks,” BofA’s Michael Hartnett said Tuesday.
It’s also reflected, I’d remind you, in the flows data.
The figure above makes the point. Last week, European shares saw yet another inflow, while US equity-focused ETFs and mutual funds saw their largest outflow of 2025.
Credit where it’s due: Hartnett consistently recommended International shares to US equities headed into the new year. He never wavered on that preference, even as he did suggest in late January that the “Trump put” would likely protect investors from meaningful losses in the US.
Late last week, Hartnett said the US stock correction’s “not a bear market.” The so-called “Trump put” may be struck far lower than most market observers were inclined to believe, but “since an equity bear market threatens a recession, fresh declines in stock prices will provoke a flip in trade and monetary policy back to a ‘he loves me’ stance,” Hartnett suggested.
Now cue the “Trump has a plan” crowd to explain how this is all just part of Trump’s “3D chess.” After all, if Trump can dissuade investors from buying US assets, that’ll lead to a softer dollar, which will enhance the efficacy of tariffs, which will then force foreigners to build giant plants in the US. Or something.
It strikes me that all the second-guessing and benefit-of-the-doubting granted to the Dunning-Kruger Administration from the bulk of sell-side pundits and boosters is a sad yet bracing opportunity to fade the Zero-Hedgers, Fourth-Turners and private offices who’s only measure of ‘greatness’ is crushing the poor and middle class under a slab of stupid and hate. Even yesterday I watched a private office guy say on a podcast, “The only way to fix the deficit is to cut spending. Raising taxes won’t do it.” That man is paid to crush the poor to benefit the wealthy so raising the Social Security cap, etc., is a ‘non starter.’ Do people like that actually believe in the Trump 2 miracle that has been pushed? I bet most do believe sinc ethey feel they bought this administration fair and square. Total regulatory capture is complete as EPA fires a thousand biologists and chemists. I’ll take the other side of that bet. And I am.
I wonder at what point will the “Trump has a plan” crowd get “tired of winning”.
For anyone who hasn’t listened to it yet, Ezra’s latest with Gillian Tett is worth an hour of your time. It’s great, but on the other hand (and Ezra kinda calls them both out around halfway through it), there’s something almost self-evidently ridiculous about the idea of “Donald Trump, Grand Strategist.” Tett’s obviously quite good, but it’s almost as if the smarter you are, the more compelled you feel to “figure it out,” where that means you can’t accept, even in theory, the possibility that a lot of Americans are just silly people and they elected a silly man and there’s nothing more to it than that, even if some of his hangerson have grandiose schemes. At one point, for example, Ezra chuckles at the notion that Trump’s capable of understanding the tenets of a so-called “Mar-a-lago Accord.” —> https://podcasts.apple.com/us/podcast/is-trump-detoxing-the-economy-or-poisoning-it/id1548604447?i=1000699148610
There’s something about the general level of cognitive functioning of the median American that is hard to believe when you are not amongst the hoi polloi. I like some of her explanations, thought she had some illuminating insights, but I tend to agree with your general angle that it is hard to see Trump allowing all of this to come together let alone masterminding it without fking it up.
Yeah, Gillian’s too smart for her own good. I mean, she’s the type of person who probably could’ve saved me from myself at various intervals in life had I known her, but ultimately, I couldn’t have made it through that interview with her if I were Ezra. The part where she says something to the effect of “We all think the systems we grew up with have some special merit or are inherently more true and natural than other systems, but that’s plain false,” is too strong even for me, someone who otherwise wholeheartedly agrees with that assessment. We learn (hopefully) over time as a global body politic what works, what doesn’t and what imperfect systems work better than other imperfect systems. It’s not as if the only reason we in the West think the neoliberal world order is best is because we grew up indoctrinated in it and by it. That’s part of why we prefer it, maybe even a big part, but the other reason we prefer it is because the other systems generally lead to demonstrably worse outcomes for more people (i.e., they’re worse from a utilitarian perspective). Did neoliberalism lead to some very bad outcomes for a lot of people too? Well, sure, but, again, from a utilitarian perspective, you can make a very, very strong case for it, and I think that’s one reason a lot of us, hopelessly biased though we surely are, aren’t ready to burn it down just yet. (Even if you consider, for example, the Iraq War as a kind of nightmarish offshoot of neoliberalism — a stretch, I think, but let’s pretend for argument’s sake — compare the number killed to the number of people neoliberal globalization pulled up out of abject poverty and thereby saved from a miserable life and early death.)
To paraphrase Churchill, neoliberalism is the worst form of government except for all the others tried to date. Kings, Emperors, self proclaimed Dictators have been responsible for the subjugation and deaths of tens of millions of people, often their own subjects. History has taught us though that if they survive the revolution they tend to get beheaded or hung from trees upside down in a strip mall. The incremental advances we have made as a society leading to neoliberalism have left many behind but has built a country that is the envy of the world ( including those who want to take it over). Those who want to take it back to some mythical golden age are nostalgic for all the wrong reasons. I don’t even know what their target really is. Certainly robber barons being in charge is their goal. The rest of us will have to eat cake.
Is it like objectively demonstrable that being absorbed into the global industrial workforce and making enough money to live some form of middle class life in a city is better than having less money and living in a village and farming? Like, are health outcomes better? Is life expectancy longer? Is quality of life higher? Is there actual data on this? I know this is kind of an annoying question since I could just ask a chatbot at this point and it’d indefatigably respond to that question and all my follow-ups and shun my gratitude to go with it, but your persona and collection of perspectives is not easily replicated so ask I will.
I didn’t take her comment about our tendency to assume that what systems we grew up with will be appropriate going forward and that “everybody is wrong” to think this way as an attack on neo-liberalism per se, but rather that looking through a primarily economic lens without considering political, social or cultural issues is wrong. Somewhat amusingly she trots out Polanyi and Bourdieu (no doubt the system she grew up with as an anthropologist) to support this assertion.
Thank you for the link, she was excellent.
I saw that interview a couple of days ago and thought it was excellent.
Last month the super smart PM’s thought a recession was not in the cards and now they are dumping U.S. stocks for European equities.
Time to sell Europe and buy U.S. again.
They are wonderful contrarian indicators.
Last month the super smart PM’s thought a recession was inconceivable and now they are dumping U.S. stocks for European equities.
Time to go short Europe and buy the U.S. again.
Have to love their penchant for being a contrarian indicator!
^^^ insert “falling knives” caveat here ^^^
the artwork says it all.
Any long-time South Park fan can tell you what Trump’s economic plan is:
Phase 1.) Collect underpants.
Phase 2.) ?
Phase 3.) Profits.