Investors Shift Away from U.S. Markets Amid Tariff and Dollar Concerns

Mercer reports a growing trend among its clients to reduce exposure to U.S. markets, driven by fears over tariffs, Federal Reserve pressures, and a weakening dollar. Hooman Kaveh, Mercer’s global chief investment officer, noted that diversification into European, Japanese, and other markets has accelerated since the early phase of Trump’s second term.

Market volatility flared in April following Trump’s "Liberation Day" announcement, with U.S. stocks and Treasuries initially dropping before recovering. Despite the rebound, dollar-based investors have seen U.S. equities underperform many overseas benchmarks in 2025.

Kaveh highlighted the dual-edged impact of tariffs—either squeezing corporate margins or fueling consumer inflation. A weaker dollar could exacerbate inflationary pressures, complicating the Fed’s ability to cut rates. He described the WHITE House’s preference for a softer dollar as "the Achilles heel" of current policy.