Trump's 'uncertainty' gives investors a reason to rebalance US: experts

US President Donald Trump has never struggled to dominate headlines. Between the capture of Venezuelan President Nicolás Maduro and renewed threats to buy Greenland, his recent moves have also revived the "Sell America" trade and sent stocks sliding over the past few days.

But when asked whether "Sell America" is the right framing, PenderFund’s CIO and portfolio manager sees it as "a bit of both."

"We all know the US market's been the place to be for the last 10 plus years. It's dominated the Mag-7. All these things have worked out and it's really been tough to keep up if you didn't own American," he said, adding that decade-long run has left pension funds globally overweight US equities, stretched valuations, and created concentration risk around technology.

Still, Taylor points to the last year as evidence that the tide may be turning, with Europe, Japan, and Canada all outperforming.

“There's such a big valuation disconnect, and everyone is underweighted and probably looking for a reason to make that allocation to rebalance because if Trump's good at anything, it's creating uncertainty," he added. “I think that's just caused people to rethink being overweight and have too much exposure to US and US dollar assets.”

When he looks at the fundamentals today, he sees valuation gaps widening and the risk-reward profile of large-cap US names looking less attractive than it once did. And while Taylor isn't writing off US equities entirely, he believes that the US still hosts some of the strongest businesses in the world, especially among the big technology names, but the price investors are paying for those leaders has become excessive. In his mind, large-cap US stocks look expensive relative to other opportunities, which is already prompting investors to shift capital elsewhere.

Beyond that, he thinks the more important story is the renewed appeal of commodities and other real assets. Canada’s experience, with strong performance in gold and precious metals, shows the potential, and he acknowledges that the US still has solid materials names as well.

Energy has also been dormant, but Taylor thinks that backdrop of underperformance, combined with rising uncertainty and shifting global dynamics, could fuel a broader sector rotation. He believes these underrepresented sectors in major US indices are now being pulled into focus by growing macro and political uncertainty.

Meanwhile, Grant Johnsey, head of market solutions, Americas for Northern Trust’s Banking & Markets group, points to a shift in foreign appetite for US Treasuries, particularly at the longer end of the curve. Notably, European pension funds have been reducing or outright selling their holdings, a move often attributed to concerns over US fiscal deficits. That fading demand has kept yields elevated on maturities of seven years and beyond.

Additionally, "recent price action suggests that Treasuries may be losing their safe haven status during periods of stress," said Johnsey, pointing to Treasury market prices that demonstrate the point, "with rates rising across the curve from 2 years and out."

"So far into 2026, I am not observing any widespread divestment in US equities and bonds from foreign investors at present," said Johnsey in a statement to BPM. "The US financial markets are too large to avoid.  A large pension fund would struggle to pull out entirely from the US in rapid fashion, lest they risk pushing prices lower by doing so and then higher in whatever markets they transition to." 

For Christine Tan, portfolio manager at Sun Life Global Investments (SLGI), it's a matter of emphasis and discipline rather than dramatic repositioning.

"Rather than a wholesale sell America, we would think of it as more rebalancing away from America," she said, noting that SLGI called for global diversification last year, even as consensus remained anchored to US assets. While the goal was never to go underweight America, given how large the market is, they still hold a meaningful allocation. Instead, the focus shifted to international developed and emerging markets, where valuations looked attractive and earnings were showing signs of stabilization, she explained. 

"It's really not about selling America. It's really more about allocating your incremental dollar and really being intentional about rebalancing away from an asset class that has done so well," she noted. 

As for pivoting into Canadian assets, Tan cautions that Canada still faces critical challenges. 

"Canada is one of the most exposed, if not possibly the most exposed country to what's happening in the US," she said, pointing to the fact that more than 70 per cent of Canadian trade flows south of the border.

But Taylor sees capital starting to trickle into Canada, which he believes contributed to the strong performance of Canadian banks last year, notably because investors wanted to have some more North American exposure but also have less US, he said. With limited Canadian holdings and cheaper valuations north of the border, many have simply bought the broader index.

Additionally, he believes most Canadian pension plans have been underweight domestic assets for years, with those same plans likely lagged last year as a result. But now, he underscored how they should now be reconsidering their positioning, particularly if Canada can generate growth, advance major projects, and present a more compelling story to global investors. That provides ample opportunity for pension funds to lead the way back into domestic markets.

"There could be a fairly good move back towards Canadian infrastructure and energy sector, and that theme could take hold," he noted.

Tan also sees more promise in private asset involvement in nation-building infrastructure projects, an area where institutional capital can participate directly in rebuilding the economy, rather than loading up on public equities. 

Still, he acknowledged that Canada's market is too small to absorb a large-scale reallocation. Europe, which has been neglected for years, also benefited from renewed interest last year. Emerging markets, like South America, have had a solid run as well, and Taylor sees Asia as a likely growth engine going forward.

He views China as increasingly stable relative to the unpredictability coming out of Washington, making it "an area that that could benefit, as the US still seems a little more unhinged right now," he said.

When asked about the erosion of the US dollar’s dominance, Taylor believes it will be slow and incremental rather abrupt. While the reserve role has been entrenched for decades, recent shocks have pushed investors to rethink how much exposure they want tied to one currency and one bond market.

Over the long-term, he expects the system to move toward a more diversified arrangement, one where a basket of major fiat currencies is complemented by a larger role for real assets, rather than a world where everyone is concentrated in US dollar assets and Treasuries alone.

Taylor urges investors to strip the emotion out of their decision-making, emphaszing that letting politics drive portfolio decisions often leads to irrational choices that hurt more than they help. . The better approach is to return to fundamentals - assessing risk and reward, weighing volatility, and determining where the odds are most favourable, he noted.

“Geopolitics is going to be with us for a while and I think that's going to be causing more volatility. When you've got volatility, it's going to be something that you can either take the long approach and look through and not focus on the short term or try and make sure you're positioned accordingly for it,” said Taylor.