From "Buy America" to "Goodbye America": The appeal of U.S. stocks is waning, and Wall Street capital is accelerating its "escape"

According to Reuters, American investors are withdrawing funds from the U.S. stock market at the fastest pace in at least sixteen years, shifting toward emerging markets, Europe, and Japan.

Data from LSEG/Lipper shows that over the past six months, U.S. investors have pulled approximately $75 billion out of U.S. equity products, with a net outflow of $52 billion since 2026 alone, marking the largest outflow during the first eight weeks of the year since 2010.

The report states that the weakening dollar has increased the attractiveness of overseas markets for American investors. Meanwhile, the slowdown in AI stock gains has prompted investors to pivot toward industrial and defensive stocks.

Since 2025, the dollar index has generally weakened, declining from around 110 at the start of 2025 and falling below the 100 mark. As of February 25, according to Tonghuashun (300033), the dollar index decreased by 0.08% intraday to 97.762. Industry insiders note that the dollar’s weakness is related to its diminished dominance in the international reserve system and is closely linked to the U.S. government’s unpredictable policies and high debt levels.

Additionally, concerns over potential risks and costs associated with AI are diminishing the appeal of Wall Street stocks. The soaring valuations of major U.S. tech giants have made investors more selective, with many seeking more attractive opportunities elsewhere.

A February survey of fund managers by U.S. banks shows that the pace of shifting from U.S. stocks to emerging market equities is the fastest in five years. Gerry Fowler, head of European equity strategies and global derivatives at UBS, said many of their conversations with U.S. wealth management clients revolve around increasing overseas investments, as they see opportunities in foreign markets denominated in dollars after observing their performance.

Since the beginning of this year, U.S. investors have invested about $26 billion in emerging market stocks, with South Korea being the largest single destination at $2.8 billion, followed by Brazil with $1.2 billion. A notable consequence of Trump’s policies is that the dollar has depreciated by 10% against a basket of currencies since January last year. While this is unfavorable for U.S. investors seeking overseas opportunities, the stronger performance of foreign markets also means higher dollar dividends.

Over the past 12 months, the S&P 500 has risen approximately 14%. In dollar terms, the Tokyo Nikkei 225 has increased by 43%, the European Stoxx 600 by 26%, the Shanghai CSI 300 by 23%, and the Seoul KOSPI has doubled. Investors are also reassessing the seemingly unstoppable rally of AI giants like Nvidia (NVDA.US), Meta (META.US), and Microsoft (MSFT.US), weighing the risks of overvaluation. They are seeking value in traditional industrial and defensive stocks.

Laura Cooper, a global investment strategist at Nuveen, said that the rotation on Wall Street from tech and other so-called growth stocks to value stocks is happening worldwide. “We are increasingly seeing U.S. investors evaluate the global landscape from a valuation perspective.”

Furthermore, U.S. stocks remain significantly more expensive than those in other regions. The P/E ratio of the S&P 500 is about 21.8 times its expected earnings, compared to roughly 15 times for European stocks, 17 times for Japanese stocks, and 13.5 times for Chinese stocks. Kevin Thozet, a portfolio advisor at Carmignac, noted that since around mid-2025, the pace of U.S. capital flowing into Europe has accelerated. Data from LSEG/Lipper shows that since January last year, U.S. investors have invested nearly $7 billion in European equity products, compared to a net outflow of about $17 billion during the four years of Trump’s first term from 2017 to 2021.