Why are more and more global investors "leaving the United States"?

Since 2026, market capital flows indicate that more and more investors are “saying goodbye to the U.S.” and shifting toward more attractive emerging market stocks. Data from Goldman Sachs shows that the U.S. stock market is experiencing its worst start since 1995.

UBS recently released an analysis report stating that the current U.S. capital market has retreated to its highest level in nearly 15 years relative to global markets, and the likelihood of U.S. stocks underperforming the global market is high. UBS has therefore downgraded its U.S. stock allocation rating to “neutral” while maintaining an “overweight” stance on emerging market equities.

In other words, this report suggests investors should allocate more to other global stock assets rather than U.S. stocks.

UBS analysts in this latest report stated that, based on research results from North American markets, the trend of capital flowing from the U.S. to other global markets “is clear.” The firm indicated that under the influence of domestic policy chaos and reduced returns from large tech companies, global investors are accelerating their withdrawal from the U.S. stock market.

Since the beginning of this year, exchange-traded funds (ETFs) tracking markets outside the U.S., such as ACWX, have increased by over 9%, while the S&P 500, which tracks large U.S. companies, has only gained 0.3% after multiple periods of high volatility.

Goldman Sachs’ analysis team in early February stated that hedge funds have been net sellers of U.S. stocks for four consecutive weeks, with the selling speed reaching its fastest since the U.S. government imposed “reciprocal tariffs” last year.

Data from the London Stock Exchange Group/Lipper also shows that U.S. investors have withdrawn about $75 billion from U.S. stocks over the past six months, with $52 billion flowing out this year alone. Based on the data from the past two months, this is the fastest capital outflow from U.S. stocks since 2010.

Flow of funds indicates that U.S. stocks are becoming less attractive to investors, while emerging market economies are gaining more favor. Data shows that since the beginning of this year, U.S. investors have invested approximately $26 billion into emerging market stocks.

Why is investor confidence in the U.S. market waning?

On February 27, the U.S. Department of Labor released the latest data showing that the Producer Price Index (PPI) for January rose more than expected. The New York stock market immediately declined, with the Dow Jones Industrial Average dropping over 500 points from the previous trading day. Market analysts believe that the higher-than-expected PPI indicates upward pressure on the core Personal Consumption Expenditures (PCE) price index, suggesting U.S. inflation may rise again.

Persistent “high blood pressure” in prices will impact the Federal Reserve’s monetary policy decisions, making the challenges facing the U.S. economy more complex and fueling ongoing concerns about its economic outlook.

Since the beginning of this year, the Chicago Board Options Exchange Volatility Index (VIX), which measures investor panic and market risk, has risen by 36.87%. Meanwhile, the U.S. dollar index has fallen about 4%, highlighting a significant weakening of investor confidence in dollar assets and a pessimistic outlook on the U.S. capital market.

The recent performance of tech stocks in the New York stock market, a major driver of U.S. stock index gains, has disappointed many investors. Since the start of the year, the Nasdaq Composite has fallen 2.44%, with the Nasdaq 100, which mainly reflects tech stocks, down nearly 1%. Over the past year, both indices had gained about 20%.

Market analysts suggest that once high-valuation tech stocks lose their appeal, it could lead to continued downward pressure on U.S. stocks.

More and more market analysts believe that the high policy uncertainty in the U.S. is a key reason for the stock market’s underperformance relative to global markets. Institutions like UBS state that the U.S. government’s repeated adjustments to tariffs, pressure on allies, high federal debt, and frequent government shutdowns have undermined confidence in the U.S. economy.

Recently, the U.S. Supreme Court ruled that the President’s broad authority to impose tariffs under the International Emergency Economic Powers Act was not authorized. Subsequently, Trump announced a 15% tariff on goods from all countries and regions, increasing global trade uncertainty. U.S. stocks then fell sharply, reflecting market concerns about the uncertainty of these developments and escalating panic.

“This is just the beginning of a new chapter in trade policy disputes, not the end,” said Morgan Stanley analyst Chris Rulkin.

Kenneth Rogoff, a professor of economics and public policy at Harvard University, told the German newspaper “Handelsblatt” that the Supreme Court’s ruling is insufficient to change the U.S. government’s aggressive tariff policies, nor can it alter the negative impact of tariffs on ordinary American consumers, which in turn affects the U.S. economy and capital markets.

Additionally, the U.S. threat to use force to seize Greenland has also triggered European capital to sell off U.S. assets and even openly discuss “capital weaponization,” further destabilizing U.S. capital markets.

In stark contrast, emerging market economies are demonstrating stronger economic potential and policy certainty, providing clearer expectations for investors. Their potential for consumption upgrades and industrial development offers more attractive prospects, making them a rational choice for investors “saying goodbye to the U.S.” and leading to deeper adjustments in global capital allocation patterns.

(Source: Economic Information Daily)