Investors are the most bullish on Treasuries relative to stocks for at least three years, as President Donald Trump’s tariff policies threaten to end the era of US exceptionalism, the Bloomberg Markets Live Pulse survey showed.
US bonds are expected to deliver a better volatility-adjusted return over the next month than equities, according to a survey of 504 market participants conducted this week. And it’s not even close, with 77% backing Treasuries, the highest level ever in the survey data going back to 2022.
The findings highlight the sea change in attitudes since the president won a second term, when the so-called Trump Trade fueled a rally in stocks amid expectations of ever-stronger growth and persistent demand for US assets. That has steadily unwound as he wielded tariffs on Canada, Mexico, China and Europe, igniting a trade war and fueling a stock-market sell off which has seen the S&P 500 Index enter a correction after falling 10% from its record high.
Past Peak
In more signs of concerns that the age of dominance for US stocks has passed its peak, just 9% of respondents say the nation’s share of global market capitalization will reclaim the record levels seen earlier in 2025 and about 40% see it instead dropping back to levels not seen in more than a year. The vast majority say tariffs — and not the policy of the Federal Reserve — will be the most influential factor driving stock valuations.
“As long as we have unannounced tariffs looming, investors should consider the market in a down-trend,” JPMorgan Chase & Co. equity strategists wrote in a note to clients earlier this week.
Almost half of investors responding to the survey expect to reduce their exposure to the S&P 500 over the next month, while fewer than 20% plan to add to it.
There’s a lack of conviction, too in what will happen if the stock market continues to fall. Earlier in the year there was an expectation a distress signal from the equity market would prompt Trump to adjust his course — a scenario known as the Trump Put that was evident in his first term.
The president is still seen as more likely than the Fed to ride to the rescue of markets this year, but few than half the respondents expect that to happen. Trump’s recent comment that “markets go up and down” suggests he certainly has a more detached approach, this time round.
More than half of survey participants expect yields on 10-year Treasuries to fall over the next month. That comes as economic uncertainty has prompted traders to increase their bets on the degree of easing expected from the Fed this year.
Asymmetric Risks
“The margin of safety” priced into the credit and equity market is so thin that these assets have “quite asymmetric” risks, said Chitrang Purani, a fixed-income portfolio manager at Capital Group Inc.
For investors, “this year is one of the years where they should feel a little bit more comfortable that the risk-reward symmetry favors fixed income given the potential downside risks for growth. This should be a supportive year for fixed income flows.”
Looking more closely at the rates market, a majority don’t see much scope for yield curve steepening in the short term. Meanwhile, more than 90% expect US yields to stay lower relative to their German counterparts than during Trump’s first term.
Only 8% see the spread between 10-year Treasury and bund yields rising above 200 basis points by the end of 2025, a level that was around the average in Trump’s initial spell in the White House.
“After years of macroeconomic resilience that kept recession at bay, and earnings-driven stock market appreciation, risk asset valuation is at a point that prices in very little downside risk,” Kevin Khang, head of global economic research at Vanguard Group Inc., wrote in a report this week. “Such low risk premia in today’s valuation make investment in risk assets vulnerable to potential downturns.”
“U.S. Treasuries, on the other hand, provide a much better balance of risk and returns,” he added.
Written by: Morwenna Coniam — With assistance from Ye Xie @Bloomberg
The post “Tariffs End the Age of US Stocks Exceptionalism” first appeared on Bloomberg