Are investors abandoning US equities?
No. Yes. Maybe?
It’s not a straightforward question. Answering it’s complicated by the extreme nature of US shares’ post-pandemic outperformance.
Recall that as 2025 dawned, the US comprised nearly three quarters of the MSCI World Developed Market index and was responsible for virtually all of last year’s global equity price performance. Those sorts of statistics prompted some analysts to ponder existential questions.
So, US shares were due for a correction, if not in an absolute sense, then surely from a relative perspective — lest non-US shares should become so comparatively inconsequential as to be irrelevant.
Sure enough, the correction came, both in an absolute sense — the S&P briefly fell ~20% from its record high — and from a relative performance perspective. The figure below’s as simple as it is poignant.
Correlation isn’t causation but… well, the chart header and annotation speak for themselves.
Although the S&P has all but clawed back to records, US shares have underperformed in 2025. And massively so. Regardless of your political affiliation, you’d be obtuse not to acknowledge that “Captain Capricious” is in part responsible for that underperformance.
The figure below, updated with the latest weekly flows data, shows US equity-focused ETFs and mutual funds just saw a third weekly net outflow.
RoW shares, meanwhile, returned to inflows and I should mention that the prior week’s RoW outflow was entirely (and then some) attributable to an anomalous ~$12 billion exodus from Japan-focused equity products.
For all the rotation fixation, US equity funds are “on track” (note the scare quotes) for another impressive annual haul. Thanks to huge pre-“Liberation Day” inflows ($155 billion from early-January to mid-March), such funds are pacing for a $330 billion 2025 influx. If realized, that’d count as the third-largest on record. Not exactly indicative of abandonment.
Still, US equities have seen outflows in seven of the last eight weeks on EPFR’s tally. As the second chart makes clear, the trend isn’t America’s friend anymore.
Coming quickly back to the first chart, it’s worth noting that US outperformance versus the rest of the world peaked the same day as Tesla.
It’s been two-months now. Exactly how many trade deals has Trump inked? I count the U.K. and that’s about it. Even if you reduce those negotiations to the 57 countries that have something more than the 10% across-the-board tariff he placed on everyone, you still have a very long way to go (not to mention the separate tariffs on steel and aluminum). Combined with his “Big Beautiful Bill” (where “BBB” actually refers to our country’s current bond rating), I am surprised the market has recovered as much as it has. The bond market has it right at this point (and they should probably be asking for even more). Something will break soon enough and the stock bulls will come to the same realization. (I have long feared unregulated crypto leading to the collapse of a reckless bank or two, but who knows?) To quote Dustin Hoffman from the movie Marathon Man. “It isn’t safe.”
H-Man, as the tide shifts, US equities are on the outbound tide while anything foreign is the inbound tide. Europe, Asia, other emerging markets all look better than US equities.