Unhedged Will the real money pivot to Europe?
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May 6, 2025 Ian Smith, a Financial Times reporter specializing in markets, joins the conversation to unveil the shift from U.S. investments towards Europe. He delves into the reasons behind this trend, highlighting rising political risks and the decline of the S&P 500. The discussion touches on the growing preference for European assets among institutional investors, the intriguing dynamics of currency hedging, and the implications for the dollar's future. Smith also adds a playful twist by exploring asset allocation strategies and economic sentiment.
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European Investors Reassess US Exposure
- European investors are reassessing their heavy exposure to US stocks due to economic and political risks.
- The weakening dollar has amplified losses for Europeans investing in US equities, driving a reconsideration of allocations.
Europe's Political Rally Boosts Investing
- Europe's political and defense efforts foster a "rally around the flag" effect boosting investment appeal.
- European investors feel offended by US political actions, prompting a move to invest more at home.
Slow Shift of Real Money
- Real money investors like pension and insurance funds move slowly but have yet to fully shift from US to Europe.
- Current ETF outflows from US assets represent only the early stage of a potential large reallocation.