Carmignac Flags Decline in US Market Appeal Due to Trump’s Tax and Trade Policies

Raphael Gallardo, chief economist at French asset manager Carmignac, has declared that the United States is no longer a safe haven for foreign investors. Gallardo cited growing risks tied to President Donald Trump’s recently enacted tax and spending bill, specifically Section 899, which threatens to disrupt international investment confidence due to its punitive tax measures targeting countries with tax policies the US deems “discriminatory.” This provision has been labeled the “revenge tax” by market observers, deepening concerns about the stability of US markets.

The warning echoes wider Wall Street apprehensions that the tax law, combined with Trump’s aggressive trade stance and worsening fiscal health of the US government, could accelerate a decline in investor confidence. Ludovic Subran, Allianz SE’s chief investment officer, suggested the measure might trigger a 5% plunge in the US dollar and a sharp 10% drop in equities.

Highlights:

• US loses status as secure investment destination due to tax and spending bill risks

• Section 899 of the bill threatens increased taxes on foreign entities, dubbed “revenge tax”

• Potential 5% dollar slump and 10% equity selloff predicted by market experts

Growing Investor Shift Away from US Amid Political and Fiscal Uncertainties

Gallardo highlighted that unpredictable US trade policies, doubts over the reliability of America’s foreign policy, and concerns about the rule of law have led traditional US allies to lessen economic dependence on the country. This shifting sentiment is driving a strategic diversification away from US assets toward more stable markets.

“Why de-risk? Because the United States have become a totally unreliable military ally and so, one has to secure supply chains, find new markets,” Gallardo explained during Carmignac’s outlook briefing for the second half of 2025.

Highlights:

• Allies reducing ties to US due to geopolitical and military reliability concerns

• Supply chain security and new market exploration motivate diversification

• Unpredictable Trump policies heighten investment risk perception

European Markets Gain as Investors Flee US Exposure

Carmignac has notably increased asset allocation to Europe, with Germany positioned as a key beneficiary thanks to sweeping fiscal reforms under Chancellor Friedrich Merz. These reforms include military spending boosts, infrastructure investments, and significant corporate tax cuts aimed at revitalizing economic growth.

Gallardo praised Trump’s unexpected role in prompting German policymakers to increase spending: “Trump managed to achieve what no one had managed before, and that’s to make the Germans start to spend.”

The trend of investors reallocating away from US markets is evident in 2025’s equity performance. By the end of May, eight of the world’s ten best-performing stock indexes were European, underscoring the continent’s rising appeal amid the volatility of US markets.

Highlights:

• Carmignac shifts investments to Europe, especially Germany, amid US uncertainty

• German fiscal reforms enhance economic growth prospects and market attractiveness

• Eight of top ten global stock indexes in 2025 are European, reflecting investor preference