From 'buy America' to 'bye America', Wall Street exodus gathers pace

Highlights:

• US investors shift to emerging markets, Europe, and Japan
• Weaker dollar boosts attractiveness of foreign markets for US investors
• AI stock rally slows, prompting shift to industrial and defensive stocks

US investors are pulling money out of their own stock market at the fastest pace in at least 16 years as Big Tech returns fade and better-performing overseas markets look more attractive.

In the last six months, US-domiciled investors have pulled some $75 billion from US equity products, with $52 billion flowing out since the start of 2026 alone, the most in the first eight weeks of the year since at least 2010, according to LSEG/Lipper data.

The shift comes despite a weakening of the dollar against other currencies, which makes buying overseas assets more expensive for US investors. It's a compelling sign that the diversification away from US assets by some international investors in the past year is gaining traction among US investors.

Since the global financial crisis ended in 2009, the "buy America" trade has rewarded investors at home and abroad thanks to a strong economy and earnings growth and dominance in the tech sector leading to outsized gains in US stocks.

More recently, the AI boom pushed the S&P 500 index to record highs last year, a strong buffer from US President Donald Trump's unpredictable approach to trade policy and diplomacy, as well as his attempts to undermine Federal Reserve independence.

Looking further afield

But as concerns have grown about the possible risks from AI, as well as the costs involved, the lure of Wall Street stocks has ebbed. The surge in value in the US megacap tech stocks that have led gains until now are making investors pickier and many are spotting more attractive opportunities elsewhere.

Bank of America's 20 February fund manager survey showed investors switched from US equities to emerging market equities at the fastest rate in five years.

"I've had lots of conversations with our wealth business in the US this year," said UBS's head of European equity strategy and global derivatives strategy Gerry Fowler.

"They're all talking about investing more offshore because at the end of the year, they looked at the performance of foreign markets in dollars and they're like, wow, I'm missing out."

US investors have poured some $26 billion into emerging-market equities so far this year, with South Korea the largest single country destination, with an inflow of $2.8 billion, followed by Brazil, with $1.2 billion, LSEG/Lipper data shows.

One of the clear results of Trump's policies has been the 10% decline in the dollar against a basket of currencies since last January. While that is a disadvantage for US investors hunting for opportunities abroad, dividends in dollar terms from better performing overseas markets will also be plumped up.

In the last 12 months, the S&P 500 has risen around 14%. In dollar terms, Tokyo's Nikkei is up 43%, Europe's STOXX 600 has surged 26%, Shanghai's CSI 300 has returned 23% and Seoul's KOSPI has doubled in value.

Investors are also re-evaluating the seemingly unstoppable rally in the shares of artificial intelligence powerhouses like Nvidia, Meta and Microsoft and the risks posed by sky-high valuations. They are seeking 'value' in traditional industrial companies and defensive stocks which can feature heavily in some overseas equity markets such as those in Germany, the UK, Switzerland or Japan.

Value and valuation

Laura Cooper, global investment strategist at Nuveen, said the rotation on Wall Street away from tech and other so-called growth stocks into value stocks is playing out on a global level.

"Increasingly we are seeing US investors look at the global landscape from a valuation perspective," she said, flagging the cyclical growth upswing predominantly in Europe and Japan.

European banking stocks, one example of cyclical stocks that typically benefit when economic growth picks up, surged 67% last year and are up a further 4% so far in 2026.

"When you overlay the valuation story with the growth story, we are seeing that rotation for US investors as well," Cooper added.

US stocks are still far more expensive than those elsewhere. The S&P 500 trades at roughly 21.8 times the expected earnings of its components, while stocks in Europe trade at roughly 15 times forward earnings and those in Japan and China trade at 17 and 13.5 times respectively.

Kevin Thozet, portfolio adviser at Carmignac, said his team have observed that flows of US capital moving into Europe have accelerated since around mid-2025.

LSEG/Lipper data shows that since Trump's inauguration in January last year, US-domiciled investors have poured nearly $7 billion into European equity products, compared with an outflow of roughly $17 billion during the four years of Trump's first term from 2017 to 2021.

"If I'm taking a very long-term view, it's, maybe, this idea of a great global rotation," Thozet said.