Research confirms investor aversion to US

New research from Morningstar has confirmed the degree to which the US President Donald Trump is impacting the decision making of asset owners globally, with more than three-quarters of respondents stating it represents a material concern.

Morningstar’s analysis said the disruption and uncertainty has been a driver for asset owners to rethink asset allocation including away from the US.

The research house said it had asked asset owners how material a range of geopolitical issues had been to their overall investment decisions over the past year, with the three US-driven issues rising to the top:

• 76% of asset owners view the trade disputes, including the tariffs levied by the US, as material (this figure proved quite stable regionally). Not surprisingly, asset owners in China overwhelmingly find this issue to be material (94%/not shown).
• 73% of asset owners view the current US administration as material
• 62% of asset owners view currency volatility/US dollar weakness as material

The research said the rapidly evolving generative artificial intelligence landscape had als become a significant factor in the institutional investment decision-making process, with 61% of asset owners globally citing it as material.

“This is more significant to asset owners in North America (71%) and APAC (66%) than it is to their counterparts in Europe (51%),” it said.

“During the qualitative interviews, it became evident that asset owners were increasingly contemplating a reduction in their capital allocations to US assets. With the US playing an instrumental role in driving the top three most material issues to asset owners, we probed a bit deeper into the quantitative data to understand whether these issues are motivating asset owners to shift their allocations away from US investments.

“In the midst of increased risk and uncertainty, 40% of asset owners report that they’ve either already decreased or are planning to decrease their allocations to US investments, with certain markets like Canada (62%/) and the UK (55%) much more likely to be reducing or planning to reduce their US allocations,” it said.

“Asset owners cited a range of factors behind their decision to reduce their allocation to the US. They are most deterred by US dollar volatility, tariffs (in markets outside of China), as well as regulatory uncertainty in the US.

“At the regional level, those in APAC markets are especially wary of regulatory uncertainty in the US (58%), while those in Europe (48%) are more motivated by concerns about tariffs than asset owners in APAC (39%). Interestingly, relative valuation and expected returns by region stands out among asset owners in North America as a prominent driver for reducing allocations to US-based investments,” the analysis said.