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Global investors are undergoing a structural rethink of their exposure to the US market, according to economic expert Rebecca Patterson.
Patterson, who served as Bridgewater’s chief investment strategist, argues that they are gradually reducing their exposure to US assets, and that their impact may be significant. Her prediction comes after talking with participants at the World Bank and the International Monetary Fund conference in Washington last week.
“There are many foreign investors who are worried about not only tariffs, but also about America’s credibility as partners,” Patterson said Monday of CNBC’s “Fast Money.”
Outside of the Trump administration’s tariff policy, she has found foreign investors and policymakers have lost faith in the United States about the broader fear of potential weaponization of capital markets to achieve their economic goals.
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According to Patterson, it could put global investors’ US holdings at risk. Foreigners have more than $31 trillion in US assets as of June last year, according to the latest US Treasury data. This is an increase of $4.4 trillion from the previous year. Thanks to Megacap Tech and the artificial intelligence trade, profits were brought when the US market reached an all-time high.
“They’re looking at the huge US allocation that has accumulated over the past few years and say, “Maybe we should be a little less, we just cut off the top.” Essentially, we have a risk premium on our US assets because we are very uncertain,” she said.
Patterson warns that even a slight reduction in global participation could pose problems for the US market.
“You pretend to be the chief investment officer of a major international pension fund or sovereign wealth fund. I’ll save 2% on US stocks, 2% on US Treasury and 4% shift,” she said. “It’s now $1.2 trillion and I’m planning on leaving America now.”
The potential $1.2 trillion sale represents 2.3% of the S&P 500’s total market capitalization as of Thursday’s closing. Still, Patterson emphasizes that capital flights don’t happen overnight.
“These investment committees take months to think about things. They hold meetings, approve it to the board, and then it’s done. But this is a slow bleeding of support from the US market, returning to home markets and new opportunities, or something like gold,” Patterson said.
US stocks have so far dropped significantly in 2025, with S&P down 4.7% during that time. The broader European Stoxx 600 index has increased by 3.9% this year, while the MSCI AC Asia Pacific Index has risen 2.8% over the same period, according to Factset.
