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The US stock market selloff could prompt investors to consider reallocating funds globally.
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Trump's policies, including tariffs, are heightening uncertainty around the US's economic outlook.
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Foreign investors may shift to European and Chinese markets amid US economic concerns.
The sell-off in US stock markets fueled by fears of a recession could prompt investors to put their money elsewhere, changing up global financial flows.
Foreign investors — who hold $17.6 trillion worth of US equities — could be tempted to pull some of their money from the US.
Monday's selloff comes as investors are already weighing massive changes in the US that have heightened policy uncertainty, including tariffs, deportations, and massive DOGE job cuts. These changes could undermine economic risk growth and increase recession risk, in turn hitting the $60 trillion US stock market.
Investors are so rattled that the S&P 500 has lost 4.5% so far this year, while the tech-heavy Nasdaq Composite is down 9.5% — bucking bullish calls earlier this year.
Trump has downplayed the economic fallout from tariffs, saying the US economy will head into a "period of transition" and adjustment. During a Sunday interview, he also did not rule out a recession, spooking markets.
Asset reallocation may spark the rise of another reserve currency
As Trump's America First policy reverberates across the world, major economies — including Europe and China — are ramping up policy stimulus to boost growth. Their moves could make these markets more attractive for investors.
If the US economy slows but doesn't slip into a recession, foreign investors may reallocate their holdings from US equities to US debt, wrote Nomura.
"After all there remains no meaningful alternative to the USD as the world's reserve currency, wrote the Nomura analysts.
However, this may not be the case if a recession occurs.
"In the case of a US recession and large-scale wealth destruction, and because of the sharp rise in foreign sovereign bond yields, there seems scope for de-risking of USD assets," they wrote.
Some foreign investors may repatriate their money home. In time, a new global reserve currency could emerge alongside the dollar.
"It would have sounded fanciful only a month ago, but after Europe's fiscal paradigm shift, perhaps it could be the euro," Nomura analysts wrote.
China stocks are looking enticing
On Sunday, Goldman Sachs said some investors are considering entering China's stock markets again as equities in the world's second-largest economy stage a resurgence following the boost from the DeepSeek hype.