Billions are evaporating from the US markets. The world’s largest asset managers are divided in their commentary, but it’s clear they are concerned. Larry Fink said he is “terrified” in the short term.
In its latest allocation update, chief strategists Jean Boivin and Wei Li of the Blackrock Investment Institute cite structural themes such as artificial intelligence and demographics as reasons to maintain a long-term positive outlook on the US. Their weighting in US equities remains unchanged.
Nonetheless, Blackrock CEO Larry Fink sounded unmistakably worried this month. He called the new tariff policy “more far-reaching than ever expected” in his 49 years in finance. In an interview with CNBC, he went a step further: “The US has gone from being a stabilizing force to a source of global destabilization. I’m less concerned over the long term, but in the short term, I’m terrified.”
The International Monetary Fund shares that concern. In its most recent World Economic Outlook, the IMF downgraded its growth forecast for the US from 2.7 to 1.8 percent. The inflation forecast was revised from 2 to 3 percent, an adjustment partly attributed to higher import costs, persistently high service prices, and the pass-through effects of import tariffs on goods prices.
Vanguard
Despite these headwinds, Vanguard CEO Salim Ramji sees no reason to let go of his preference for US equities. “We see it [the confidence] in our inflows,” he said this week in an interview with Wall Street Week on Bloomberg. “We see it in the behavior of our clients and in the convictions of our own team.”
His optimism contrasts sharply with the wave of selling that has hit US stocks. In the eyes of many investors, the United States has lost its luster, according to the data. Since the announcement of Trump’s new import tariffs on April 2, the S&P500 has dropped more than 6 percent. The index is now trading 10 percent lower than just after the New Year.
Yields on government bonds have continued to rise, while the dollar index (DXY) has fallen 8.5 percent since the beginning of the year. That’s a striking combination for a country traditionally viewed as a safe haven. European stocks, which were also impacted by the tariffs, are down just 0.5 percent since the start of the year.
Between belief and reality
That Vanguard’s teams are becoming more cautious is evident from the asset manager’s revised growth forecast. The projection for 2025 was lowered from 2.1 to 1.7 percent. The inflation estimate was raised to 2.7 percent.
The expectation is that the March jobs report will show weakness, partly due to government layoffs and delayed hiring in sectors such as construction and manufacturing—industries that are heavily reliant on public spending and vulnerable to trade policy shifts.
Despite the volatility, Vanguard has seen inflows of 117 billion dollars so far in 2025. Nearly 100 billion has been invested in the domestic market. According to Ramji, the idea of American exceptionalism is “absolutely not over”. He believes Trump’s trade policies will not change that.
Fidelity sees a turning point
Fidelity, the third-largest asset manager in the US, is more cautious. Analyst Jacob Weinstein warned that the exceptionalism narrative is beginning to crumble.
Internal research by the firm on the dominance of US stocks in wealth managers’ investment advice confirms this trend. As of early 2025, sentiment has shifted, according to Fidelity.
Weinstein attributes this change entirely to the tariffs announced on April 2. If fully implemented, he said, they pose a direct stagflation risk to the US economy. At the same time, they could generate strong headwinds for trade partners with large surpluses toward the US, such as China, Japan, and the EU.
Combined with Fidelity’s expectation that inflation is likely to rise further due to the tariffs, the firm is now advising broader diversification, with a clear emphasis on non-US equities. Within the allocation committee, there is a growing preference for foreign markets. US stocks remain in portfolios, but without the automatic priority they enjoyed last year. Gold and commodities are mentioned as hedges against persistently high inflation.
Europeans pull the plug
Perhaps the clearest sign of declining confidence in the US is seen in European capital flows. Since the announcement of Trump’s “Liberation Day” tariffs on April 2, European investors have pulled 3.9 billion dollars from American-exposed investment funds managed by Amundi, UBS, and State Street, according to Morningstar data on equity ETFs. That’s more than during the first quarter of 2020, when the Covid-19 pandemic began.
At Amundi, 1.7 billion euros were withdrawn from US equity funds, including 592 million euros from its S&P500 tracker. UBS and State Street each recorded nearly 1 billion euros in outflows from US equity ETFs.
Bloomberg reported on Tuesday that European equity funds from Blackrock’s iShares, Amundi, and UBS were the biggest beneficiaries of this patriotic shift. They saw a combined inflow of 2.4 billion euros. Funds based in Germany and France have attracted a particularly notable amount of capital in recent weeks, according to Morningstar.