According to Mercer LLC, a wave of clients has shifted away from US assets as investors react to President Donald Trump’s trade and interest rate agenda.
The consulting firm says concerns over tariffs, pressure on the Federal Reserve, inflated fiscal deficits and the risk of a soft dollar are pushing money into Europe, Japan and other markets.
Mercer’s global chief investment officer, Hooman Kaveh, said it is reducing US exposure as the company’s 3,900 clients, which oversees roughly $17 trillion.
The opening week, early stages of Trump’s second term, “has been a trigger for authentic diversification,” he said in an interview this week. “We certainly see that in our client portfolio where there is a flow towards diversifying markets, regions, asset classes and currency.”
The market nerves were evident in early April after Trump’s “liberation day” announcement, which fell before both U.S. stocks and the Treasury Department rebounded. Still, US stocks ousted many overseas benchmarks in 2025 for dollar-based investors.
Kaveh said investors struggle to pricing tariff channels as their effectiveness could reduce two ways.
“If there’s a situation where tariffs are trying to push prices up and the low dollar could potentially increase inflation, the Fed will pose more challenges to cut interest rates,” he added. As mentioned in the Bloomberg report, he has a preference for the White House. The weaker dollar “Achilles’ heels to the current approach” is because it can broaden the inflationary impulses from tariffs.
Where is the money going?
The repeated criticism of Jerome Powell, which Trump repeatedly criticized, said he was slow to lower borrowing costs along with the president’s move towards President Governor Lisa Cook. “The politicization of the Fed puts the Fed on the corner,” he pointed out. “It’s blurry to focus on inflation and employment right now. That’s not good news. I’m advocating for diversification.”
meter We see clients increasing allocations to European stocks Japanif prices are deemed more attractive than the US, the company has also steady interest in private markets, such as venture funds associated with artificial intelligence build-outs. “Most of our clients seem to think that AI will be a very important driver of the macro environment for the next five to ten years,” says Kaveh.
Trump’s attack on Powell has denounced market fears
In addition to the debate, Bundesbank President Joachim Nagel warned Wednesday that suppressing the independence of the US central bank could backfire, raising long-term borrowing costs and eliciting similar political pressure elsewhere. Trump is trying to step up his aggressive demand for interest rate cuts and reject the Federal Reserve Governor, looking to replace Powell.
“If the Fed’s independence is permanently politically damaged, the consequences will be serious,” Nagel said in Frankfurt.
“This would put the US economic and financial stability and prosperity at stake,” he praised Powell’s handling of the conflict, but warned that doubts about the Fed’s commitment to price stability could push higher yields at the longer end of the curve, even if policymakers slow down at the shorter end.
“There were indications that the attack on the Fed contributed to the steep US yield curve on the corresponding trading day, with a high drop in yields at the short edge and a high yield at the long edge,” Nagel said. “This shows that financial markets certainly understand the importance of central bank independence.”
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