Investors at Milken eye foreign shores as tariffs cloud US outlook

Reuters

07-05-2025

BEVERLY HILLS, California, May 7 (Reuters) - Market uncertainty caused by U.S. President Donald Trump's erratic policymaking and aggressive stance on tariffs hung heavily over an investor gathering in Los Angeles this week, with many saying it is time to pivot to non-U.S. assets for more clarity.
Concerns over the U.S. economic trajectory, and growing chances of an imminent recession fueled by White House trade policies were major topics at the Milken Institute Global Conference in Beverly Hills, California, where Wall Street dealmakers and global investors gathered to raise capital, sell companies and get a handle on the industry's mood.
On panels and in more than a dozen private interviews on Monday and Tuesday, attendees said the U.S. economy's size and depth of its capital markets left few viable alternatives for a dramatic shift away from American assets. Many, however, said the volatility was pushing them to consider higher allocations to non-U.S. markets, Europe in particular.
"We've spent a lot of time focused on the U.S. and Europe, and historically, we have had a little bit of a bias towards the U.S.," said Purnima Puri, governing partner at HPS Investment Partners, a New York-based credit investment firm.
"We do think Europe is starting to look significantly more interesting, and that's a market we're spending time on," she said on stage at the conference on Tuesday.
Entrepreneur Andre Loesekrug-Pietri elicited grins and pats on the back as he walked the halls sporting a green baseball cap with the words "Make Europe Great Again," in a tongue-in-cheek poke at Trump's red "Make America Great Again" hats.
While many downplayed the risk of capital outflows from the U.S. that spooked markets in the immediate aftermath of Trump's tariff announcement last month, the search for alternative geographies was a major theme at the event.
Some bankers characterized it as a chance to diversify portfolios with too much U.S. exposure, particularly earlier this year and late last year, when the market was betting Trump's second presidency would boost the economy through deregulation and tax cuts.
Contributing to the shift are Europe's improved growth prospects and lower asset valuations.
"At the start of the year, I think the view was that the U.S. was the place to be, and that's where capital is going to flow, and ... that has shifted differently," said Lee Kruter, partner and head of performing credit at GoldenTree Asset Management, speaking on stage.
"In the first quarter we looked for opportunities in Europe," he added, citing better growth prospects and lower risks of stagflation than the U.S.
Several senior bankers and investors said western Europe is the obvious place to invest in but it could have challenges as well.
U.S. Treasury Secretary Scott Bessent sought to calm event attendees, noting in a speech on Monday that betting against America was a time-tested mistake.
But concerns over a tariff-induced slowdown and a prolonged trade war with China have kept investors on edge.
Several bankers said in interviews that the market's current enthusiasm may be premature and that it would take little, like a comment from China on stalling trade talks, to send stocks lower again.
Saira Malik, chief investment officer at Nuveen, said non-U.S. assets could continue to do better as long as tariff uncertainty persists, but over the long-term U.S. assets could outperform other geographies again, with the tech sector being a major driver.
FINANCING US DEBT
A less urgent but also prominent concern was the U.S. fiscal outlook, with the prospect of rising government debt feeding doubts over the long-term safety of U.S. assets.
"I believe that the underlying foundation of the dollar and Treasury market has been eroding over the last number of years, and we better pay attention to it pretty soon," Alan Schwartz, executive chairman at Guggenheim Partners, warned on a panel on Monday.
Steven Mnuchin, founder and managing partner of Liberty Strategic Capital, said the U.S. dollar had no alternative as the global reserve currency.
"With that comes a level of responsibility," the former U.S. Treasury secretary in Trump's first administration said at the event on Monday.
"It is very important for us to keep the dollar as the reserve currency of the world, because if people don't view that, then we're going to have an even bigger problem financing our debt."