Something is breaking in the “buy America” trade — and the numbers are hard to ignore.
U.S.-domiciled investors have yanked roughly $75 billion out of American equity products over the past six months, with $52 billion of that flowing out since January 1st alone. That’s the fastest eight-week exodus since at least 2010, according to LSEG/Lipper data. For a market that spent the last 15 years as the undisputed gravitational center of global capital, this is a seismic shift.
So where’s the money going? Everywhere else, apparently. Emerging markets have absorbed about $26 billion so far this year, with South Korea leading the pack at $2.8 billion in inflows, followed by Brazil at $1.2 billion. European equities are getting fresh American money too — nearly $7 billion since Trump’s inauguration, compared to $17 billion in outflows during his entire first term.
The math tells the story. Over the past 12 months, the S&P 500 has returned about 14% — respectable in any normal year. But in dollar terms, Tokyo’s Nikkei is up 43%, Europe’s STOXX 600 has surged 26%, Shanghai’s CSI 300 has gained 23%, and Seoul’s KOSPI has literally doubled. When you’re a U.S. wealth manager staring at those numbers, the conversation about “going global” starts real fast.
Valuations make the case even louder. The S&P 500 trades at roughly 21.8 times forward earnings. European stocks sit at 15 times. Japan at 17. China at 13.5. That’s not a gap — it’s a canyon. And with the dollar down 10% against a basket of currencies since last January, foreign dividends are getting plumped up for American investors who make the jump.
This isn’t just a hedge fund thing. UBS reports that their U.S. wealth management clients — the people with real money — are all talking about investing more offshore. Laura Cooper at Nuveen calls it a value rotation playing out on a global level, with the growth upswing in Europe and Japan too attractive to ignore. European banking stocks alone surged 67% last year.
Bank of America’s February fund manager survey confirmed the trend: institutional investors switched from U.S. to emerging market equities at the fastest rate in five years. The AI-fueled mega-cap rally that kept everyone glued to U.S. tech is losing its grip as valuation fears mount and investors get pickier about where they deploy capital.
Does this mean the U.S. market is done? Not even close — it’s still the deepest, most liquid market on Earth. But the “just buy the S&P” trade that worked effortlessly for a decade and a half is getting serious competition for the first time. For traders, the takeaway is simple: if you’re 100% U.S.-allocated, you might be leaving money on the table in a big way.