Should you move your money out of the US?

The US has been the centre of the global economy and stock investing for decades, so much so that it has come to seem unassailable. But is US exceptionalism coming towards an end and are US stocks still the best investment?

The latest fund flow data from the Investment Association shows retail investors withdrew £91 million from North American-focused equity funds during August, though this was dwarfed by the £841 million that was withdrawn from UK funds.

The general rout in equities does reflect a weakening faith in the economic supremacy of the US, which has been at the heart of the global stock market for decades.

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“Equities led outflows, reflecting rising caution and a reassessment of regional risks versus US dollar diversification,” said Miranda Seath, director of market insight at the Investment Association.

Analysis from AJ Bell shows a sharp increase in DIY investors’ top picks including global funds that deliberately exclude US assets.

“We looked at a sample of products with this investment focus and found a notable uptick in both the number of customers holding them and the amount of money invested,” said Dan Coatsworth, head of markets at AJ Bell. “The biggest proportion of inflows has gone into Sipps (self-invested personal pensions), followed by ISAs.”

Are US stocks overvalued?

US stocks have been dominant in global investing for so long that it starts to feel inevitable, as if there is something hard-wired into American companies that means they are destined to outperform their global counterparts.

After all, the US economy is the biggest in the world, right? Well, yes – but if that’s the basis on which investors should allocate, then US stocks are already hugely overvalued. The US accounted for 27.7% of global GDP in 2024, but its companies account for around half of the global stock market.

In other words, US equities are nearly twice as expensive as they ought to be based on the country’s share of global GDP. The numbers look even worse when looking at global trackers like the MSCI World Index.

“Many global funds track the MSCI World index which had a 72.45% weighting to the US as of 30 September 2025,” said Coatsworth.”

But the events of 2025 to date have given a hint that the concept of US exceptionalism could be under threat. The S&P 500 shed value during April, in the wake of Liberation Day tariffs, and Trump’s threat of 100% tariffs on China on 10 October prompted a further stock market selloff.

“Last year was all about the ‘Trump bump’, with investors embracing the US in the hope that looser regulation and a pro-business president would drive up American asset values,” said Coatsworth. “This year is all about the ‘Trump dump’ as his policies have proved divisive, causing some investors to regard the US as a less attractive play to make money.”

What is US exceptionalism?

The meaning of the phrase “US exceptionalism” usually refers to a prevailing belief that the US is qualitatively distinct and superior to other nations.

This sentiment draws on popular tropes from American history – think the ‘American dream’ – and ascribes intangible qualities to the US and its citizens, like superior work ethics.

In turn those feed into a more economically-driven version of US exceptionalism which views the US economy as fundamentally superior to others. Proponents might argue that Americans are inherently more productive, or that US institutions and laws make its economy fundamentally more competitive.

It’s an easy doctrine to subscribe to, even subconsciously, given the hugely dominant role the US plays in the global economy.

But it leads to some skewed behaviour, particularly in financial markets. US stocks currently trade at around 25 times earnings, compared to around 18 in the UK, Taiwan and Germany.

Is US exceptionalism coming to an end?

Several shocks to the US stock market this year have all challenged various aspects of US exceptionalism.

The emergence of DeepSeek, for example, sent the S&P 500 down 1.5% in a single session because it struck right at the heart of the idea that the US was the global centre of technological innovation and that its companies had a de facto monopoly over the development of artificial intelligence (AI).

April’s tariff turmoil saw another crash, and while equity markets have recovered to similar levels as before Liberation Day, the latest jitter shows investors are still nervous about the possible impact of tariffs.

“The introduction of new tariff policies on 1 August heightened global trade uncertainty, while speculation around fiscal policy and perceptions that equity valuations may be peaking in certain markets further impacted investor activity,” said Seath.

Amplifying this trend is a growing view that the AI bubble could be about to burst. With the Magnificent Seven currently accounting for over a third of the S&P 500, investors’ over-exposure to the US is, in reality, over-exposure to a bet that the long-term economics of AI will play out according to a relatively optimistic set of assumptions.

How to invest for the end of US exceptionalism

If you do believe that the era of US exceptionalism is over, there are some steps you can take in order to protect your portfolio.

One means of gradually diversifying away from the US would be to feed future investments into a global ex-US tracker instead of a global vanilla fund. By doing so, “an investor would slowly be able to dilute their exposure to America”, says Coatsworth.

He highlights Xtrackers MSCI World Ex-USA ETF (LON:XMWX) as one of the most popular choices of global ex-US funds. Coatsworth cites Morningstar data showing that the ETF’s assets under management have increased from £276 million to £3.12 billion, during which time it has delivered a 16.3% total return according to FE Fundinfo data as of 7 October.

You could also invest in some global markets outside the US that are more overlooked. Coatsworth observes “greater appetite for UK, European and Japanese investments” so far this year.