LIVE MARKETS-Who is the big beneficiary from assets leaving the US?

ReutersApr 21, 2025 5:03 PM

Main US indexes tumble; Nasdaq off most, down ~3.3%
All S&P 500 sectors red; Cons Disc off most, down ~3.8%
Dollar slides; crude down >2.5%; bitcoin up ~2%; gold up ~2.5%
U.S. 10-Year Treasury yield rises to ~4.40%

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WHO IS THE BIG BENEFICIARY FROM ASSETS LEAVING THE US?

Assets are leaving the United States on concerns about how tariffs will impact the U.S. economy. So far, Manulife John Hancock Investments notes that a big beneficiary has been European financials, but with a relatively small market cap, they can only absorb so much.

The United States, China and Europe have been "taking turns in leadership with the U.S. leading the last several years, but now Europe is the equity leader,” Emily Roland and Matthew Miskin, co-chief investment strategists at the firm said in a note.

Indeed, European equities are up 10% year-to-date in U.S. dollars. And European financials are up 21% year-to-date in USD. This sector is the largest in European markets, making up 22% of the MSCI Europe index.

“European financials typically like robust global growth and higher inflation. This is at odds with the backdrop we are seeing, but an easing central bank and a positive sentiment shift have been supporting gains. This part of the market is attempting to pick up the slack of the U.S. technology sector struggling,” Roland and Miskin said.

But the European financials sector market cap is only $2.5 trillion whereas the S&P 500 technology sector market cap is $13.1 trillion. “This is why the overall global equity market is still down nearly 6% year-to-date.”

The U.S. makes up 63% of the MSCI All Country World index and so a call on equities is a call on the US, the strategists’ note, and they see continued volatility for global equities and lower return potential overall. As a result, the firm recommends "leaning into income opportunities across the bond market."

(Karen Brettell)

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