Investors Turn Away from US Stock Market Amid Trump-Induced Recession Fears

Concerns about an economic recession have emerged due to the tariff and other economic policies of the Donald Trump administration, prompting investors to seek investment options beyond U.S. stocks.

On the 16th (local time), The Wall Street Journal (WSJ) reported that investors are moving from U.S. stocks to cash, bonds, gold, and European defense industry stocks.

Donald Trump, President of the United States. Photo by UPI Yonhap News

According to Allight Solutions, during the first half of March, individual investors traded in their U.S. retirement accounts, 401(k), at more than four times the usual level. February's trading volume was the highest in five years. Investors selling U.S. stocks are seeking stability in money market funds (MMF), short-term bonds, and gold. European defense stocks are also gaining popularity.

However, according to Allight, although trading in 401(k) accounts surged last month, the trading volume accounted for only 0.43% of the total account balance. This compares to an average of 0.12% over the past few years.

Nevertheless, WSJ evaluated this as a sudden change compared to the assumption in recent years that the U.S. economy would remain strong and the stock market would continue to rise. According to a survey by the American Association of Individual Investors, the proportion of optimistic investors in the stock market is at its lowest level since September 2022.

According to the Investment Company Institute, a fund trade group, individual investors added $30.4 billion to MMFs over seven days ending on the 5th, the highest amount in the past year. According to Morningstar, U.S. physical gold exchange-traded funds (ETFs) recorded net inflows of over $5 billion in February.

Some investors have also turned their attention overseas. According to The New York Times (NYT), since President Trump's inauguration, the S&P 500 index has fallen by 6%, while Germany's DAX index rose by 10%, and the STOXX Europe 600 index increased by more than 4%. The Hong Kong Hang Seng index rose by more than 20%. Germany's astronomical special infrastructure and defense budget has raised expectations for economic revitalization, and the resurgence of European rearmament has pushed up the stock prices of European defense companies.

According to the London Stock Exchange Group, investors invested $1.8 billion in European stock ETFs registered in the U.S. last month.

Jitania Kandari, Co-Chief Investment Officer (CIO) of Morgan Stanley Investment Management Solutions and Multi-Asset Group, said, "Now is definitely the time to pay attention to regions outside the U.S.," adding that conversations with clients about increasing exposure to overseas stocks have increased.

NYT reported that in recent weeks, investment bank reports, client briefings, and trading ideas recommending investments outside the U.S. have increased on Wall Street.

Chinese stocks are also an area of interest for investors. According to Bloomberg News, the Franklin Templeton Institute forecasted the emergence of a "Xi Jinping put." This prediction is based on the view that Chinese authorities will introduce market-friendly measures and stimulus policies to achieve an economic growth target of around 5%. As China's artificial intelligence (AI) DeepSeek has sparked a global craze and Chinese tech stocks have been on the rise, JP Morgan Chase and Templeton predict that the Chinese stock market rally will expand beyond the tech sector in the coming months.

Gary Dugan, CEO of the Global CIO Office, said, "The recent shift of investment from the U.S. to China may signal a recovery of Chinese assets within overseas portfolios," adding, "The valuation gap between Hong Kong and the U.S. still offers significant upside potential for Chinese tech stocks."