How the end of the ‘American exceptionalism’ trade is rippling around the globe

Subscribe to enjoy similar stories. What do priests in New Zealand, Taiwanese life insurers and the oil-rich nation of Norway have in common? They have all been riding high on booming U.S. markets—and are now vulnerable to a reversal in fortunes.

The superior performance of U.S. investments over the past decade-plus has been a giant magnet for the world’s money. Foreign investors own almost 20% of all U.S.

equities compared with 7% at the start of this century, Goldman Sachs data shows. The bets generated years of windfall profits, making up for dreary returns on offer in many overseas markets. Now, foreigners are racking up losses as the so-called American exceptionalism trade sputters.

The Trump administration’s tariff whiplash, doubts about the U.S. artificial-intelligence trade, and recession fears have rattled U.S. markets this year, even as European ones have rallied.

The selloff could prove temporary. But it is stoking concern that if U.S. markets really were to crater, the collateral damage would be profound.

“You’ve got an enormous global concentration in U.S. financial markets," said Brad Setser, senior fellow at the Council on Foreign Relations and a former U.S. Treasury Department official.

“Investors are taking an increasingly big risk." Overseas investors are more vulnerable to U.S. market turbulence because of their exposure to the dollar. The S&P 500 is down about 9% from its February peak, but eurozone investors have lost about 13% due to the dollar’s slide, according to FactSet data.