Global investors’ rotation out of American assets will go on for years if U.S. President Donald Trump persists with his trade policy, according to a strategist who timed the unwind of U.S. exceptionalism almost perfectly.
Societe Generale SA head of asset allocation Alain Bokobza was a U.S. asset bull for a year until September 2024, when he warned of cracks appearing. He reiterated that call in February, warning investors to slash their exposure to U.S. stocks and the U.S. dollar. The S&P 500 has fallen 15 per cent since, while the Dollar Index is down nearly nine per cent.
“Back in September, we told clients that valuations in the U.S. were worrying and that the U.S. election could open the door to a less rosy scenario,” Bokobza said in an interview in Paris. “The new administration in Washington has created a very high level of broad uncertainty. This great rotation is just starting and could last for years.”
The financial dominance of the U.S. is being challenged, with the U.S. dollar and U.S. Treasury bonds losing appeal. U.S. equities have been underperforming global peers this year, amid concerns that U.S. trade policy and tariffs will damage economic growth and help stoke inflation.
Bokobza added that for years, the U.S. was the only place where investors could find growth and its equity markets were priced for perfection, with heavy concentration in technology stocks. But such companies are now suffering from tariffs. The U.S. dollar has been overvalued for some time and the reversal could have further to go, he added, as long as trade policy uncertainty remains.
“In risk-off periods over the past 20-30 years, the dollar has been rising because it’s always been a shelter. I haven’t seen that here,” Bokobza said. “Because the risk premium applied to all U.S. assets is on the rise and it’s the end of that exceptionalism.”
Since the start of the year, the S&P 500 nearly hit bear market levels — a drop of 20 per cent from peak to bottom — before recovering only partially after Trump announced a pause in the application of punitive tariffs, except for Chinese products. Further exemption on electronics and semiconductors were welcome but chip-export restrictions to China further dampened the mood on tech stocks.
Bokobza sees no relief on the monetary policy side either. He doesn’t expect the U.S. Federal Reserve to intervene any time soon, noting that the central bank is in a difficult position. It’s unlikely to move until June, once the impact of tariffs on economic growth and inflation is visible, he added.
Fed Chair Jerome Powell has been resisting pressure from the administration, with Trump increasingly vocal about the need to cut interest rates. Gold surged above US$3,500 an ounce for the first time on Tuesday, as concern mounted that Trump could fire Powell.
An attack on the independence of the Fed would unsettle markets further and would change risk pricing on U.S. assets. “That would be a game-changer and we’re not that far already,” he said.
The strategist also sees renewed demand from international clients for European stocks. Portfolios were so concentrated in U.S. assets that investors forgot about the fact there was also great and cheaper companies in Europe, Japan and China, said Bokobza.
“There is no winner in protectionism and the U.S. administration is having difficulty to prove their policy is good for the country,” Bokobza said, adding some assets will suffer more than others. “If European stocks have outperformed, and the euro has climbed despite falling interest rates, that means something is going on in Europe,” he said.
Michael Msika, Bloomberg News
©2025 Bloomberg L.P.
