Trillions of funds are flowing! Mercer warns: Trump's policies drive investors away from the U.S. market
Mercer Consulting warned that Trump's policies have led investors to reduce their investments in the U.S. market, with funds flowing to regions such as Europe and Japan. The company manages a total of $17 trillion in assets, and clients are concerned about tariffs, rising deficits, and a weakening dollar. Trump's trade war and pressure on the Federal Reserve have resulted in poor performance for the U.S. stock market, leaving investors uneasy about future inflation and interest rate policies
According to the Zhitong Finance APP, Mercer Consulting stated that U.S. President Donald Trump’s attempts to reshape the global trade landscape and pressure the Federal Reserve to lower interest rates are prompting investors to reduce their investments in the United States. Hooman Kaveh, the global chief investment officer of this New York-based investment consulting firm, mentioned that the company manages 3,900 clients with total assets of $17 trillion, and these clients are shifting funds from the U.S. to Europe, Japan, and other regions. He noted that the outflow of funds is due to concerns over tariffs, Trump’s pressure on the Federal Reserve, rising deficits, and the weakening outlook for the dollar.
In an interview this week, Kaveh stated that the start of Trump’s second term has “triggered diversification in investments.” He said, “We are indeed seeing this in our clients’ portfolios, with funds flowing into diversified markets, regions, asset classes, and currencies.”
In early April, the uncertainty surrounding Trump’s trade war caused panic in global markets, leading to declines in both the U.S. stock market and U.S. Treasury prices following his “liberation day” announcement. Although both have since recovered, the performance of the U.S. stock market still lags behind that of most global markets for dollar investors this year.
U.S. stocks lag behind other global markets
Tariff Challenges
Kaveh stated that tariffs present a difficult challenge for the market, as they may weaken corporate profit margins or be passed on, leading to inflation.
He said, “If tariffs push up prices, and a weak dollar could exacerbate inflation, then the Federal Reserve will face greater challenges in lowering interest rates.”
He added that the Trump administration’s broad support for dollar depreciation is “a fatal weakness of the current strategy,” as it could intensify inflation caused by tariffs.
Bloomberg Dollar Index near three-year low
Kaveh noted that Trump’s frequent criticism of Federal Reserve Chairman Jerome Powell for being slow to act on interest rate cuts, as well as his attempts to fire Federal Reserve Governor Lisa Cook, have prompted investors to withdraw from U.S. assets.
He stated, “The politicization of the Federal Reserve is putting it at a disadvantage. The current focus on inflation and employment is becoming blurred. This is not good news. However, it does advocate for diversification in investments.”
Kaveh mentioned that Mercer Consulting’s clients are planning to increase investments in European and Japanese stocks, which still have attractive valuations compared to U.S. stocks, while clients are also considering investments in private markets, such as venture capital related to the artificial intelligence boom He stated, "Most of our clients seem to believe that artificial intelligence will become an important driving force in the macro environment in the next five to ten years."
