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It’s beginning to appear that all investors are not talking.
It was everything anyone could talk about earlier this year, especially around the time of President Donald Trump’s full-fat “mutual” tariff announcement in early April.
Since then, a rather creepy calm has come down in the market despite a severe escalation of violence between Israel and Iran. US stocks measured via the S&P 500 index have culminated an impressive 24% recovery from April depth, returning within record high crying distances. After all, is America great again?
For some money managers, this is justification for the challenges and tested strategies of holding the nerves throughout the period of market turbulence and buying dips. Among them is Fahadkamal, Chief Investment Officer of Private Bank Kuutos. “We didn’t sell anything,” he told me in the volatile market situation in April. More broadly, he said, “The world is overweight for a reason.” He intends to continue digging into political noise and keeping his focus on the company and its revenue.
“The stories go back and forth,” he said. “But the only Northstar is revenue growth. It’s still far better in the US.”
Of course, it’s completely reasonable and it’s worth keeping in mind that it’s a tenth of the way we pass Trump’s second term. Economic policy making for the scattering gun that comes with him will eventually pass.
However, it remains unwise to assume that investors’ views on the US have not changed. Bank of America’s latest monthly fund manager survey shows that less than a quarter of investors expect US stocks to generate the highest returns in the next five years. I believe the winner will be international stocks. This inverts the usual preference order.
In a sense, this is already evident in the market, judging by the rare outperformance of European stocks’ brilliance in 2025. But it’s a big mistake to expect conservative investors to restructure their portfolios overnight. Partly because it involves loosening from long-standing benchmarks that tend to be weighted by the market capitalization of the underlying component companies. This leaves the US with around 60% slices of the global equity index, or 70% of gauges only in developed markets.
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Kaitlin Hendrix of Dimensional Fund Advisors said in recent weeks that he has hired many inquiries from money managers on the subject. But the obvious problem is that deciding to lose weight in the US – parking a smaller percentage of funds than the global benchmark means mechanically making something else overweight.
“It should be a thoughtful decision,” she said. “It wasn’t long ago that people were saying, ‘Why investing in something other than the S&P 500′ about six months ago.’ ” S&P was crushing it. “The conversation is now around Asia, but mostly in Europe, and whether it makes sense to strengthen investments even at record highs.
For now, for many investors, the answer is to stick with the business as usual and continue to send money to the US, but use a much more robust stabilizer in the form of dollar hedges to protect your portfolio from damage that arises from back slides.
But this only delays the inevitable. This is because the global market is experiencing what Salman Ahmed, head of macros at Fidelity International, calls it “rewiring.” He said that mercury economic and geopolitical decisions from the new US administration are to “rewrite the rules of the game,” and that the exam by portfolio managers on whether it makes sense to park 70% of Trump’s US equity portfolio is authentic. That’s especially because the huge slides in April, even short-lived, were extremely painful.
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“The index we use is in Autopilot and we send capital to the US,” he said. What’s tricky is that, as Dimensional’s Hendrix suggested, the so-called “real money,” that is, pension funds, insurance companies, and more, make the rare decision to tweak or fork from the benchmark.
Some brave souls involved in managing this money, some brave souls who must make decisions, more importantly, if it doesn’t work, should be held accountable.
In large public pension plans, investment committees must be called. Outside of a severe crisis, these committees usually meet once a quarter. Heavy decisions, such as breaking the local asset allocation that has been implemented for at least 10.5 years, take time. And that is especially true when it means dumping the benchmark and understanding whether it involves stakeholders posting weaker returns than the global index at some points.
It takes months to really test whether institutional investors spend money on places with their mouths.
katie.martin@ft.com
