Institutional Investors Say Markets Are Underestimating Tariff Impact; Many Pull Back on U.S. Stocks, Finds CoreData Research
"Any optimism institutional investors have about the world's most important trade negotiations belies a sense that global trade already has irrevocably changed, and thus, portfolio construction must adapt to a new reality.'
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CoreData conducted a pulse survey of 132 institutional investors and 22 institutional consultants who collectively manage or oversee more than $4.9 trillion in assets.
Nearly half (49%) of respondents believe the markets are too complacent about the impact of U.S. trade policies. While the S&P 500 has stormed back from its initial freefall in April, 56% of institutions hold a bearish view on U.S. equity markets over the next three months – the most pessimistic outlook of all regional equity markets.
As early tariff moves begin to bite, CoreData found that institutional investors aren't waiting around for more clarity to act. Nearly half (49%) have already made tactical portfolio changes in response to shifting U.S. trade policies, and 47% have or plan to make changes in their strategic allocations.
European and Asian institutions have been more inclined to take action, with more than half already making significant portfolio changes compared to just 36% of U.S. institutions so far. In the case of Europe, this may be because European institutions are more bearish (65%) in their near-term outlook for U.S. equity markets than peers in the U.S. (49%).
When asked about their base case for the outcome of President Trump's trade policy negotiations with China, the survey found:
66% of respondents are optimistic that a U.S. China trade agreement will be reached within the next year, limiting market disruption. U.S. investors (69%) are more optimistic than peers in Europe (58%).
32% overall believe the U.S. and China will not be able to reach a trade agreement and will reinstate trade barriers that lead to significant economic disruption.
'The research suggests that any optimism institutional investors have about the world's most important trade negotiations belies a sense that global trade already has irrevocably changed, and thus, portfolio construction must adapt to a new reality,' said Michael Morley, head of CoreData U.S. 'With a wide range of economic scenarios now very much in play, institutions are looking at ways to de-risk and build greater portfolio resilience.'
Tactical Shifts Point to Proactive Risk Mitigation
Among investors making tactical adjustments
56% have reduced exposure to U.S. assets, including 48% of U.S. institutions and 63% in Europe.
49% have trimmed exposure to trade-sensitive assets.
44% are hedging exposure to the U.S. dollar, including 32% of U.S. institutions and 47% in Europe.
Other tactical changes include rotating to value stocks and/or defensive sectors (41%) or increasing cash allocations (40%). Few (20%) reported increasing commodities exposure.
Long-Term Strategic Repositioning Underway
The long-term picture also points to a reduction in U.S. exposures as other developed markets suddenly look much more attractive. Notably, the survey found:
69% of institutions believe evolving tariff policies will accelerate a global shift away from treasuries and the U.S. dollar, including 59% in the U.S. and 82% in Europe. Indeed, 51% of those making strategic allocation shifts are pivoting away from these safe haven assets (highest among European institutions, 69% compared to 33% in the U.S.).
64% expect President Trump's trade policies will lead to structurally higher inflation and slower economic growth.
62% believe that sustained downward pressure on the dollar would lead to transformative change to the financial system, forcing institutions into more significant portfolio changes.
About one-third (33%) are shifting to a more conservative asset allocation, increasing exposure to hedge funds/low volatility strategies (35%), or increasing exposure to inflation-hedging assets (32%) such as real assets.
'Institutions are demonstrating a much nimbler reaction function than we have seen in the past with respect to strategic allocation changes,' added Morley. 'Ex-U.S. developed markets and dollar and treasury alternatives are set to be the main beneficiaries. Trump's initial tariffs have done little damage to date, but investors are clearly worried about the long-term impacts.'
More insights from CoreData can be found at https://coredatainsights.com/
Methodology
The 2025 CoreData Institutional Investor Pulse Survey is based on responses from 154 global institutional investors collected in Q2 2025. Respondents include public and private pensions, insurers, foundations, endowments, family offices, and institutional investment consultants.
About CoreData Research
CoreData Research is a global research firm providing research-driven insights on the priorities and challenges facing financial institutions, advisors and influencers. CoreData's deep understanding of the broad financial services market is driven by world-class research capabilities and a global network of partners with a focus on fund management, wealth management, asset allocators, thought leadership and brand. Founded in 2002, CoreData has offices throughout Europe, the Americas and Asia-Pacific, with its U.S. headquarters in Boston. For more about CoreData, visit https://www.coredataresearch.com.
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