The movement of investors out of the United States to Europe may represent a long-term shift in the allocation of capital rather than a short-term trend, but innovation-driven sectors in the US market will still remain attractive, a global investment expert has noted.
ECP Asset Management global growth fund portfolio manager Annabelle Miller said international investment into the US has been strong for the past 20 years, but political shifts in that country and Europe are starting to reverse that trend.
“International investment into the US has seen an enormous amount of activity since the mid-2000s with Europeans, Japanese and other foreign investors putting capital into that, which has driven the whole ‘US exceptionalism’ narrative,” Miller told smstrusteenews.
“What we have found with Trump coming in is that he has become the catalyst, along with his tariff posture, to reassess global capital allocation.
“The overseas investors who have benefited enormously from gains in the NASDAQ and the S&P 500 are sitting on very large equity positions that have appreciated meaningfully in currency terms and they are now thinking they should repatriate some of that capital back to their own country or into other areas.
“When you overlay that with geopolitical concerns in Europe and NATO issues with funding, there’s been a resurgence of European investment into Europe.”
She noted this had led to the announcement of large financial packages in Germany to boost investment in the country, the creation of a €500 billion defence infrastructure fund and a Savings and Investment Union to promote the use of private savings for investments inside the European Union.
“The Europeans are trying to get their act together to drive private investment into equity markets, as well as fixed-income markets and private markets for investment,” she added.
“You could argue this is a cyclical phenomenon, but we are seeing signs it could be more structural with just how domestic policy in the US and Europe is setting the agenda now, so increased investment in Europe, which is targeted not at maintenance capital, but more at growth capital, could be very good for European shares.”
Despite this, she said the US would continue to be a drawcard because of its ability to generate profit at a better rate than Europe.
“When you look at the US and its ability to strike capital, it’s unparalleled. The reason behind that are centres of innovation,” she said.
“Silicon Valley is one of those and when you have these centres of innovation, it just attracts the capital and then you get huge waves of innovation and technology coming out of these businesses because everyone is in a melting pot and ideas are bubbling to the surface all the time, and the capital is there to invest in them.
“That’s not going to change anytime soon and from that point of view you could argue everyone’s called the end of an American exceptionalism too early.”
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