Societe Generale strategist Alain Bokobza, who accurately warned that US financial dominance might be waning, expects the shift away from American assets to persist for years under the trade policies pursued by President Trump.
After Bokobza’s September 2024 warning, the S&P 500 declined about 15% and the Dollar Index fell nearly 9%, illustrating a notable change in investor sentiment.
Bokobza points to several factors he believes are prompting portfolio reallocation: higher tariffs, increased trade uncertainty, and concerns that the central bank’s independence could be undermined. These dynamics are encouraging investors to explore opportunities in European, Japanese, and Chinese markets instead of remaining heavily exposed to US assets.
Investors responding to tariff-driven trade shifts are recalibrating risk and return expectations. Tariffs can alter supply chains and corporate profit margins, making growth prospects for US-listed companies less certain. That uncertainty can diminish the appeal of US equities relative to markets where trade relationships appear more stable.
Concerns over the Federal Reserve’s independence also play a role. Market participants often rely on central bank credibility to judge monetary policy effectiveness and inflation control. Any perception that monetary policy might be influenced by short-term political priorities can reduce confidence in the dollar and US-denominated investments.
As a result, capital is flowing toward regions seen as offering diversification and alternative growth drivers. European markets attract investors with relatively attractive valuations and the prospect of policy stability within the euro area. Japan’s longstanding export-led recovery and corporate reforms have made its equities more compelling, while China’s rapid technology and consumption-led expansion continue to draw interest despite geopolitical risks.
While market dynamics can change, Bokobza’s assessment highlights how policy choices and geopolitical developments influence global capital allocation. For investors, the current environment underscores the importance of diversification across regions and asset classes, as concentrated exposure to any single market—no matter how large—can become a vulnerability when policy or sentiment shifts.