A wave of volatility in U.S. equity markets has driven
investors toward crypto vehicles, with digital asset funds recording a record
$7.05 billion in net inflows in May.
Speaking at a financial conference, Michalis
Persianis, Chairman of Cyprus’s Fiscal Council, said “US equities are now
unpredictable and entail unknown risks,” noting that capital is shifting toward
alternative hedges like crypto.
The trend comes amid heightened market instability
following President Donald Trump’s surprise tariff announcement on April 2. The S&P 500 fell nearly 10% over two trading days
after Trump pledged sweeping new tariffs. The CBOE Volatility Index (VIX)
spiked to the mid-50s, a level not seen since the March 2020 Covid crash,
signaling intense investor anxiety.
Bitcoin ETFs Inflows
Investors have increasingly turned to digital assets
not only as a growth play but also as a hedge against inflation and erratic
fiscal signals. Traditional equity funds, particularly those focused on U.S.
large caps, have seen outflows as market sentiment weakens.
Persianis noted that part of the traditional equity
allocation “is being partially replaced by alternative hedges,” suggesting the
shift could be more structural than cyclical.
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The realignment follows a year of uneven macroeconomic
signals and speculation around the 2025 U.S. presidential election, which has
added a fresh layer of uncertainty to the outlook for American markets.
Rising Deficits and Shifting Trade Policies
Persianis’ comments resonate with a recent report by
the Financial Times, which highlighted a complicated situation in the US equity
market.
Rising deficits, shifting trade policies, and a weaker
dollar have prompted some to question whether American exceptionalism in
markets has ended.
The latest warnings stem from mounting policy
uncertainty tied to a potential change in administration. The US fiscal deficit
continues to grow, and further stimulus proposals could push debt even higher.
Shift Focus to Global Stocks as US Outlook Weakens
A separate report by Business Insider added that fund
managers are turning away from US equities in favor of international stocks,
citing growing risks from trade policies and a potential global recession.
Citing Bank of America survey, the report showed that
a majority of investors now expect international stocks to outperform US peers
over the next five years.
The survey revealed that 54% of global fund managers
believe international equities will be the top-performing asset in the years
ahead. Just 23% expect US stocks to lead performance, while a combined 18%
picked bonds or gold as their preferred long-term bet.
This article was written by Jared Kirui at www.financemagnates.com.
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