There’s now a market premium on patriotism wealth managers and their clients need to contend with and it’s called the “sell America trade.”
Or maybe not.
You see, it’s hard to tell if this recent market phenomenon is a legitimate investing strategy or merely Wall Street marketing.
The sell America trade, to offer the best definition possible, is when investors unload their US assets en masse in favor of foreign markets or geopolitically neutral safe havens like gold. Such moves have generally occurred in reaction to a President Trump tariff announcement, policy statement or social media posting that sparks a loss of confidence in the American economy or financial markets.
On Monday, for example, global investors sold off US stocks, Treasury bonds and even the US dollar apparently in response to the President’s social media attack on Federal Reserve Chairman Jerome Powell.
On his Truth Social account yesterday, the President posted that ″‘Preemptive Cuts’ in Interest Rates are being called for by many,” adding that there is “virtually No Inflation” in America, and that costs for energy and “most other ‘things’” are declining.
“With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump wrote.
Powell did not respond to the President’s attack, maintaining radio, or social media, silence. Nevertheless, the sell America crowd did move, sending the S&P 500 and dollar index lower and Treasury yields higher (bond yields move inversely to prices). All three moved in tandem – and seemingly away from the United States.
Christopher Lange, head of investments at Cache, for one, admits that recent events, such as the tariffs and President Trump’s comments on the Federal Reserve, have forced market participants to reconsider the strength of the American economy and the forward-looking outlook for the U.S. stock market. Furthermore, he does not think any company will be completely immune from these recent events, although the impacts will be felt unevenly.
Still, while he views these events as impacting American businesses, he remains bullish on U.S. stocks and the overall American economy.
“We remain committed to our belief that U.S. stocks, and the American economy, will continue to be leaders of growth, innovation, and wealth creation. America is home to many of the world’s most resilient and iconic companies, brands that consistently set the standard for innovation, performance, and global leadership,” Lange said.
The best way to navigate these times of uncertainty is good old fashioned portfolio diversification in his view.
Elsewhere, Thomas Raymond, investment management partner at Callan Family Office, for one, said new market strategies can be indistinguishable from investing narratives that are both a “bug and feature” of how financial markets operate. Whether one agrees with them or not, one cannot discount their effect on asset prices over the short-term in his view.
Over a longer-term horizon is a different matter, according to Raymond, and it hinges on the degree of hyperbole.
“Those who flipped houses under the premise that real estate ‘never declines’ is a quintessential example. America being in ‘perpetual’ decay, or something to that effect, would be cautionary words. That is when this market phrase could become more of a bug for those embracing this as a strategy, as opposed to a feature,” said Raymond.
Raymond believes the recent market reaction has been challenging for those companies close to the “blast radius” of these tariffs. Multinationals leveraged to the Chinese economy, whether it be their supply chains positioned there or with consumer exposure, have borne the brunt.
“But these market moves assume almost no end in sight with these trade negotiations. That strikes us as speculative,” Raymond said, adding that whatever happens in Washington, corporate America will adapt, respond, and pursue new ways to grow earnings.
Finally, Noreen Brown, co-chief investment officer at Summit Financial, believes the US stock market, particularly large cap stocks, and the US dollar have been overvalued for quite some time. As a result, she sees the recent shifting of assets to international stocks and bonds more as part of a prudent portfolio rebalancing than a true negative play or statement on US assets or the American economy.
“Having a diversified portfolio of global assets is a real market strategy. Today, expectations for greater fiscal stimulus and lower interest rates outside of the US in addition to heightened policy uncertainty in the US are tailwinds for non-U.S. assets over the coming months. The ‘sell America trade’ reflects the rebalancing across stocks, bonds and currencies that has been long overdue,” Brown said.
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