Tariff deals could flip "sell America" trade, pull investors back to U.S. stocks
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.
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