This is the “Sell America” trade in one chart.
President Donald Trump’s policy moves are shaking up global markets and making US assets less appealing relative to their global peers.
The stock market offers a clear example of this. While the US benchmark S&P 500 has shaken off tariff jitters and turned positive for 2025, it’s still badly lagging its Asian and European counterparts. This marks an abrupt shift from the US dominance of previous years.
“American equities look expensive relative to historic norms, almost any way you slice them, and some investors seem more wary of holding dollar-denominated assets during Trump’s second term,” Russ Mould, investment director at investment platform AJ Bell, told Business Insider.
But “Sell America” extends beyond stocks. The US Dollar Index — weighted against a basket of global currencies — is sitting at a multi-year low. US government bonds show a similar trend, as investors lose confidence in them as the ultimate safe haven. Prices have fallen, pushing yields higher.
As a result, investors chasing oversized returns in the US are no longer overlooking Europe and Japan.
While Japan, the world’s fourth-largest economy, has been witnessing a comeback in its stock markets since 2023, investors have also recently turned bullish on Europe, where governments have pledged to ramp up spending, particularly in defense.
Investors see the growth expected from the fiscal expansion as early signs of a new dawn in the old continent.
“There is a joke that Europe is a museum. That may have been the case in the past. But it is dramatically shifting from a staid and relatively dull investment landscape to one of the more compelling,” Sam Rines, a macro strategist at asset manager WisdomTree, told Business Insider.
The momentum has boosted stock indexes, with the STOXX Europe 600 and Germany’s DAX indexes up 8% and 20% higher so far this year, respectively.
The optimism is a stark contrast from the years following the global financial crisis, when several eurozone economies struggled with debt crises.
Rines described the continent as being in the “early innings of a renaissance.”
“From bilateral trade breakthroughs to potential de-escalation in US-EU tariff battles, the policy pendulum is swinging from fragmentation toward cooperation,” he said.
These changes are shaping market risk, company cash flow, and investment strategies, he added.
In particular, Germany, the world’s third-largest economy, has announced spending plans on infrastructure and defense after years of conservative fiscal management.
Emmanuel Cau, Barclays’ head of European equity strategy, told BI that global investors are increasingly interested in putting money to work in the region.
“Trump 2.0 and changing geopolitical dynamics has driven Europe to loosen their fiscal taps (largely Germany for now) and embrace a pro-growth policy path,” he said by email.
Earlier this week, Blackstone, the world’s largest private equity company, said it plans to pump at least $500 billion into the continent over the next decade.
European regulators “are looking at putting pressure on the European Union regarding deregulation. We think Europe has the prospect of doing better than they had in the past,” Stephen Schwarzman, Blackstone’s CEO and cofounder, told The Financial Times.
Japan awakened from deflationary slumber
Over in the east, Japan’s economy has been moribund for decades since the country’s asset bubble burst in the 1990s, leading to what was called the “Lost Decades.”
During this time, Japan’s economy has been in a deflationary spiral. Now, it’s at a turning point, with headline inflation holding above the target 2% level since April 2022.
In May, core inflation hit 3.6%, helping wage increases, which supported domestic spending.
“A ‘benign’ wage-price spiral has liberated the country from its lost decades,” economists at Global Data.TS Lombard wrote in a Wednesday report.
Rajiv Biswas, the CEO of research group Asia-Pacific Economics, said Japan’s transition from deflationary pressures has helped corporate earnings, driving inflows into Japan’s equity markets.
According to government data, overseas investors bought 8.21 trillion yen worth of Japanese equities and bonds in April, marking the highest level of net inflows on record.
Japan’s outlook this year is still weighed by issues, including Trump’s tariffs, a stronger yen, and an expected slowdown in the global economy. Japan’s stock market has also come off turbocharged highs after the benchmark Nikkei 225 gained 30% in 2023 and another 20% in 2024.
Investors are upbeat about the country’s improvements, from the economy to corporate governance reforms. Japan has also been boosted by the Warren Buffett effect after Berkshire Hathaway invested in a cluster of trading houses.
The structural reforms, alongside other factors like a weak yen, have helped drive a wave of corporate mergers and acquisitions in the last few years.
Japan is expected to hold its upper house election in July, prompting some investor concerns about political stability should the ruling coalition lose seats.
Reforms and stronger corporate governance are expected to continue, boosting investor confidence and foreign interest in Japan’s stock markets, wrote strategists at Lombard Odier, a Swiss private bank, in a Wednesday report.
With inflation stabilizing, Japan is also expected to stick to conservative spending policies aimed at reducing its massive public debt, a stance that could help limit market fallout from political uncertainty.
“In our view, political instability may not disturb Japan’s financial market as much as investors fear,” wrote the Lombard Odier strategists.
