
Winds of change as rotational shifts gather momentum. The performance of global equities this year unveils two trends. First, the US market is no longer investors’ darling, as fund managers increasingly jump on the bandwagon of reducing their US dollar exposure. This explains the lacklustre 0.5% decline in US equities (as of 3 Mar), as compared to average gains of 9.4% for Japan and Asia ex-Japan. Second, within US equities, investors are clearly pivoting away from technology plays towards more traditional industries such as energy, materials, and industrials. Both trends are underpinned by fundamental drivers and are likely to persist in the coming quarters.
The shift away from US assets has been well flagged in the media. Elevated US indebtedness has raised concerns over Uncle Sam’s ability to service rising debt costs, a debacle made worse by the “One Big Beautiful Bill”, which introduces substantial tax cuts at a time when the country can ill afford it. Adding fuel to the fire is the recent US Supreme Court decision on the legality of Trump’s tariff war, which opens the door to potential repayments of previously collected tariff revenue. These fiscal concerns, coupled with Trump’s frequent attacks on the independence of national institutions, have compelled investors to diversify their holdings and reduce portfolio concentration in US markets.
technology is both tactical and strategic. On the tactical front, it reflects a broader move away from “crowded trades”, where valuations are rich and expectations remaining sky high. Importantly, the shift from tech plays also signals investors’ progression to the next stage of the AI investment cycle. From an initial focus on “innovators”, attention is now turning to identifying the “winners and losers” of the AI revolution.

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