America’s grip on global finance is slipping. For over a decade, the country dictated the pace of stock markets, currencies, and interest rates, but now, investors are pulling out.
The S&P 500 is struggling, the dollar is weakening, and economic uncertainty is pushing capital into Europe and Asia. Just eight weeks ago, Wall Street was betting on Donald Trump’s return as a catalyst for more tax cuts and tariffs, fueling a rally in US stocks and the greenback.
The US economy is slowing, and investors aren’t waiting around to see how it plays out. Trump’s trade war with China, tensions over Ukraine, and Elon Musk’s government-driven cost cuts have injected fresh doubts into the market.
Meanwhile, Germany’s massive spending plan is lifting European stocks, bonds, and the euro, while China’s new AI startup DeepSeek is raising doubts about America’s dominance in tech.
The once-unstoppable S&P 500 Index, less than a month removed from a record high, just logged one of its worst weeks of underperformance relative to the rest of the world this century. The US share of world market capitalization has also slipped since peaking above 50% early this year.
The S&P 500 is badly trailing European benchmarks, not to mention Hong Kong’s Hang Seng Index, which is up roughly 20%.
Treasury Secretary Scott Bessent is already warning of a “detox period” as the administration shifts growth away from government spending and onto the private sector.
“Could we be seeing that this economy that we inherited starting to roll a bit? Sure. And look, there’s going to be a natural adjustment as we move away from public spending to private spending,” Bessent said on CNBC’s “ Squawk Box .”
“The market and the economy have just become hooked. We’ve become addicted to this government spending, and there’s going to be a detox period,” he added.
Tech stocks and US dollar are affected the most
Investors are questioning the dominance of American tech, and European and Chinese companies are taking advantage. Bloomberg data shows the Hang Seng Index is leading the charge, with Alibaba and BYD attracting investors betting on a tech recovery in China.
Tesla’s stock has dropped more than 30% in 2025, while BYD outsold Tesla in several European markets. BYD’s China-listed shares have jumped over 25%, reinforcing investor confidence in China’s economic support for its tech sector.
At the same time, Germany’s DAX Index is hitting new record highs, fueled by defense stocks and steelmakers. The Stoxx Europe 600 Index remains cheaper than the S&P 500, making it an attractive alternative.
Meanwhile, the US dollar is tumbling. It has dropped 4% from its January peak, and last week, the Bloomberg Dollar Spot Index hit its lowest level since November, as the euro climbed by nearly 5% last week, its best run since 2009, thanks to rising German bond yields.
JPMorgan and Deutsche Bank analysts expect the euro to keep climbing, with Europe pushing forward with long-term fiscal stimulus.
Trump’s economic plans shake markets
Trump isn’t making any guarantees about the US economy. Speaking on Fox News’ “Sunday Morning Futures”, he refused to rule out a recession in 2025. “I hate to predict things like that. There is a period of transition because what we’re doing is very big,” Trump said.
On top of that, the US economy has gone from seemingly unshakable to a source of worry, and JPMorgan economists said in a note to clients after the release that they see a 40% chance of recession this year “owing to extreme US policies.”
Federal Reserve Chair Jerome Powell is holding back on interest rate changes, saying the Fed is waiting to see how Trump’s policies unfold. “Uncertainty around the changes and their likely effects remains high,” Powell said. “We do not need to be in a hurry and are well positioned to wait for greater clarity.”
Fed Governor Adriana Kugler, who was not at the forum, said in a speech delivered Friday in Portugal that she sees “important upside risks for inflation” and said that “it could be appropriate to continue holding the policy rate at its current level for some time.”
As markets have been roiled by Trump’s shifting positions on his agenda — specifically his tariff plans — traders have priced in the equivalent of three quarter percentage point reductions by the end of the year, starting in June, according to the CME Group’s FedWatch gauge.
“Policy is not on a preset course,” Powell said. “Our current policy stance is well positioned to deal with the risks and uncertainties that we face in pursuing both sides of our dual mandate.”
The remarks also came the same day that the Labor Department reported a gain of 151,000 in nonfarm payrolls for February. Though the total was slightly below market expectations, Powell said the report is more evidence that “the labor market is solid and broadly in balance.”
“Wages are growing faster than inflation, and at a more sustainable pace than earlier in the pandemic recovery,” he said.
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