A month has passed since Donald Trump’s Liberation Day tariff announcement. In that period, we’ve seen financial markets tumble and, for most parts of the world, fully recover. If you’d been on holiday for those four weeks and not looked at your portfolio or the news, you might not realise anything had happened.

Yet those four weeks could go down in history as being a pivotal moment for markets. Not because of the brief slump in asset values, but for triggering a potentially significant shift in investors’ mindset towards exposure to the US.

Investors have been happy to pay a premium for US shares relative to other parts of the world such as Europe and Asia over the past decade or so. At the start of 2013, the S&P 500 traded on the same 12.5-times multiple of earnings as the MSCI World index, a popular benchmark for the global stock market. The FTSE 100 traded on 11 times earnings, a slight discount.

In 2016, the gap between all three indices started to widen and that’s continued since. At the start of 2025, the S&P 500 traded on 22.3 times 12-month forward earnings estimate, compared to 19.5-times for the MSCI World and 11.2-times for the FTSE 100. Investors were happy to pay nearly twice as much for a US share as an UK one.

You have to go back to 2002 until 2007 to see a period when US equities last underperformed the global market on a consistent basis. Anyone who started investing in the past 10 to 15 years won’t have known a period where US shares struggled badly for a long time.

Over the past 15 years, the S&P 500 has returned 476% including dividends versus 303% from the MSCI World, according to data from FE Fundinfo. These performance figures might give you the impression the US is a guaranteed money maker but that is certainly not the case if you look back in history.

REASONS WHY APPETITE FOR THE US MIGHT WEAKEN

Markets fell after the Liberation Day speech in April 2025 because investors worried about tariffs backfiring and causing damage to the US economy, instead of strengthening it.

It’s prompted certain investors to think hard about their portfolios and wonder if they’re too reliant on the US for returns. Even someone who has a global equity tracker fund and not a US-specific fund will still have significant exposure to that part of the world – they might not realise unless they look under the bonnet of their portfolio.

The superior performance from US equities, particularly big tech companies, in recent years has increased the weighting of the US in the MSCI World index to account for approximately three quarters of the entire global market. That’s double what it stood at in the 1980s.

Whether it’s being prudent about not being over-exposed to one region or disagreeing with Trump’s policies and worrying about long-lasting damage to the US economy, there is a growing list of reasons why someone might be thinking about dialling down US exposure.

The big question is where will investors turn to? Cheaper valuations are a natural starting point. The UK market is still cheap, so is Japan, China and emerging markets in general. Is it a coincidence these territories have been among the best performing markets year-to-date? Possibly not.

Germany, Brazil and Hong Kong have all delivered 10%+ returns so far in 2025 whereas the US is in the red and the worst performing major market.

Speaking on AJ Bell’s Money & Markets podcast, Peter Fitzgerald, chief investment officer, Macro Discretionary at Aviva Investors, remarked: ‘We need to be open to a period where US assets lag those of the rest of the world.

‘The globe is over-invested in US assets,’ he added. ‘I don’t think it would take a huge amount to see a period whereby that rebalances.’ He says the MSCI World global benchmark being 72% invested in the US is ‘not a balanced benchmark’ and believes it should be less than 50%.

AN EQUAL-WEIGHTED OPTION

This situation might prompt investors to look at equal-weighted tracker funds, a type of investment that is growing in popularity as they reduce concentration risk.

Certain investors might be familiar with the concept. For example, an S&P 500 tracker fund might be heavily exposed to a handful of mega cap tech names like iPhone seller Apple (AAPL:NASDAQ) and cloud computing-to-gaming giant Microsoft (MSFT:NASDAQ) because they are dominant names in the underlying market cap-weighted index. An equal-weighted version of that US index would have the same amount of exposure to all constitutes in the index.

An equal-weighted fund tracking the MSCI World index works in the same way, to a point. You might think such an index spreads the asset allocation equally between countries around the world, which would solve the problem of the US being overly dominant. It doesn’t quite work that way.

The equal-weighted version takes the same companies that belong to the ‘normal’ version of the MSCI World – 1,352 large and mid-cap stocks from 23 developed market countries – and once a quarter rebalances so they each member represents a same-sized slice of the cake.

Whereas the ‘normal’ version of the MSCI World currently has a 72% weighting to the US, the equal-weighted version of the index has 41.7%. Someone invested in this version of the MSCI World index would effectively still have exposure to the US, but significantly less reliance compared to the ‘normal’ version.

There are other ways of reducing exposure to the US such as trimming positions in US-specific funds or putting new money into non-US assets. Each investor will choose their own strategy, and it will be fascinating to come back in a year’s time to see if the great rotation has happened, or whether investors’ addiction to the US was just too strong to give up.

DISCLAIMER: AJ Bell referenced in this article owns Shares magazine. The author (Dan Coatsworth) and editor (Tom Sieber) of this article own shares in AJ Bell.

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