Talk of the need to lower exposure to U.S. assets grew louder this week, but asset managers in Europe are not abandoning the country. Recent market moves, they argue, do not justify a strategic shift away from the U.S., with equities rebounding toward record highs after signs of progress on Greenland at talks in Davos.
Market sentiment improved on Wednesday after Donald Trump told his audience at the World Economic Forum in Davos that the U.S. would not use force in its dispute with Denmark over Greenland. He dropped his threat to impose new tariffs on European countries after agreeing on what he described as ‘the framework of a future deal’ on Greenland. The understanding was reached in talks with Mark Rutte, NATO secretary general, easing immediate concerns about an escalation in transatlantic trade tensions.
After falling from its all-time high over Monday and Tuesday, the S&P 500 rebounded more than 1 percent on Wednesday. The yield on the U.S. 10-year Treasury fell about 5 basis points, while the VIX volatility index dropped 16 percent.
Investors expect the Greenland dispute to be resolved through negotiation, with the U.S. seeking greater access to resources and security cooperation, and Denmark preserving sovereignty. “That is not a recipe for lasting market disruption,” said Jack Janasiewicz, portfolio manager at Natixis Investment Managers.
“The market correction so far has been marginal,” said Jordy Hermanns, portfolio manager multi-asset at Aegon Asset Management. “What you see is mainly a wait-and-see attitude rather than a real risk-off move.” A genuine “sell America” trade, he added, would imply sustained capital outflows rather than modest positioning shifts.
History repeats itself
“We’ve been here before,” said Janasiewicz, referring to earlier episodes linked to America First rhetoric. Those triggered sharp but short-lived rotations out of U.S. assets. “The follow-through was limited.”
The Danish pension fund that made headlines this week for saying it would divest from the U.S. is not exiting the dollar either. AkademikerPension’s chief investment officer said the fund would sell U.S. Treasuries, but keep other assets in U.S. dollars, including short-dated agency debt, Axios reported.
Thomas Altmann, head of portfolio management at QCPartners, said it is simply too early to declare a trend. Sentiment has turned quickly before during Trump’s presidency. “If there is a peaceful and amicable solution, U.S. assets will be back in focus,” he said. One shift he does observe is that U.S. Treasuries are less dominant as a safe haven, helping explain strong demand for gold.
That move toward gold is visible across portfolios. “You do see a sharp rise in precious metal prices, driven by the search for alternatives to the U.S. dollar,” Hermanns said. Equity markets and credit spreads, however, continue to signal expectations of de-escalation rather than confrontation.
Fundamentals, asset managers argue, remain intact. “A year ago, the U.S. was the only region worth investing in. Three months later, pension funds were talking about avoiding U.S. assets,” said Han Dieperink, chief investment officer at Aureus. “That tells you more about sentiment than fundamentals.”
American firms earn more, have higher margins and grow faster than peers elsewhere, Dieperink said, justifying higher valuations. While corporate governance under the current administration is weighing on sentiment, he sees that as temporary.
Simon Wiersma, investment strategist at ING, agrees. “The headlines suggest panic, but the underlying market data do not,” he said. Last week, the equal-weight S&P 500 closed at a record, a sign of improving breadth. “This looks more like rotation than a structural sell-off.”
Still, caution remains. Several managers flagged tariffs as the key risk that could change the picture. A material escalation in U.S.-EU trade tensions would hit growth, inflation and valuations. For now, markets are not pricing that outcome. “For a U.S.-EU trade war scenario, the pullback would have to be much larger,” Hermanns said.