Tariff deals could flip "sell America" trade, pull investors back to U.S. stocks
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The euro slid, and Japanese and European stocks fell following new trade deals — cross-asset moves that may signal cracks in the "Sell America" trade.
Why it matters: Investors rushed into non-U.S. markets earlier this year amid policy uncertainty, driving the MSCI ex-USA index up nearly 20% year to date. But if tariff deals restore confidence in the U.S., that trade could start to unwind.
What they're saying: "This whole notion of U.S. exceptionalism being over and you have to go overseas is overdone," says Jay Hatfield, CEO of Infrastructure Capital Advisors.
- "Asian markets and the European markets declined because I think it was correctly viewed that we won this negotiation," Hatfield tells Axios.
- The tariff deal is "not good" for the European economy, which could also weigh on the European stocks, he says.
Between the lines: The deal may be bearish for many asset classes in the region, as the EU is set to face nearly its highest tariffs in history, which could trim a percentage point off the region's growth, PIMCO told Bloomberg.
Zoom in: The European stock market is also missing the key defining factor of the American stock market's bull run: technology, Hatfield says.
- "They were relying on sort of the old economy, exporting to the U.S., and so their growth prospects are diminished."
- Asian markets are also exposed to tariff headwinds, and Hatfield is bullish on the region (excluding China), given those concerns.
Be smart: The U.S. and China engaged in trade talks Tuesday.
- An agreement has not been reached, though Chinese officials indicated there would be an extension of a truce set to expire Aug. 12.
- Treasury Secretary Scott Bessent rebuffed claims of an agreement in an interview with CNBC, but added that "the momentum is with us," especially given the deal with Europe.
- Hatfield agrees. "China really is at risk. Otherwise, they wouldn't be negotiating with the U.S."
Yes, but: Both Japanese and European markets are still outperforming the S&P 500 year to date.
- "Importantly all three are at or close to new [all-time-highs] showing the breadth of the global equity bull market," said Jay Pelosky, founder of TPW Advisory.
- Pelosky is more bullish on Europe and Asia, but wrote that this is the "best period for global macro investors in the last 15+ years" in a recent note.
The bottom line: As President Trump continues to get what he wants out of trade deals, that could make investors more bullish on U.S. stocks than their foreign counterparts.
