Certainly, the fund flow statistics seem to suggest that the weakness of US equity markets in the first quarter has been used by price-sensitive investors as a tool to buy back in. Calastone data for April showed investors ploughing £1.51bn into North American equity funds. The group said that net buying started in earnest on 8th April, “just as the market began to speculate that President Trump was about to reverse his Liberation Day tariff schedule”. 

While no-one particularly wants the US stock market to drop, it is a slightly depressing outcome. Active managers have been hoping that some balance would be restored to global stock markets. If the attitude of most investors is that they will buy US when it’s going up, pause when it falls, and then buy the dip, it doesn’t say much for the capital allocation wizardry of markets, nor the long-term prospects for other markets. 

However, it may be too soon to call the end of the diversification trade. The flows into the US had already started to wane by the end of the month. By that point, Calastone said, the US stock market had recovered half the peak-to-trough losses it had suffered between the middle of February and early April. It appears that investors may have limits when it comes to their US allocation. 

Equally, the US administration retains the capacity for chaotic outcomes. For the time being investors believe that Armageddon has been averted, but Trump has some hefty tariff negotiations ahead over the next few months, not least with the European Union. The majority of tariffs are postponed rather than cancelled, and 10% tariffs remain in place, which may yet have a significant impact on the US economy. It is also worth noting that CDS spreads, the cost of ‘insurance’ for US government debt, have started to widen out, suggesting investors are still not comfortable with the economic path of the US administration. 

The reversion to US assets shows a certain lack of imagination among investors. However, the recent volatility should have reminded them that the US technology trade is not a one-way street.