The U.S. stock market experienced a sharp reversal. After opening higher, major indices saw a broad sell-off overnight. The Nasdaq Composite fell nearly 1% at one point during the session, while the small-cap-focused Russell 2000 Index dropped over 1%. All indices ultimately closed lower. Software stocks were hit particularly hard, with the iShares Expanded Tech-Software Sector ETF (IGV) closing down 2.55%. ServiceNow plunged more than 5%, and Salesforce fell over 4%. A Wall Street analyst warned that growing concerns about the impact of AI are intensifying, suggesting the software industry could be eroded by AI-driven workflows, potentially affecting its valuation multiples.
Meanwhile, the cryptocurrency market faced a severe sell-off. Bitcoin briefly fell below the $66,000 mark, dropping over 4% at its low, though it pared losses to a 1.74% decline by the time of writing. Ethereum and SOL both fell more than 3%. According to data from CoinGlass, 144,691 traders were liquidated globally in the past 24 hours, with total liquidations amounting to $458 million.
The catalyst for the moves was U.S. non-farm payrolls data that significantly exceeded expectations, leading traders to scale back bets on Federal Reserve interest rate cuts this year. On February 11, Jeffrey Schmid, President of the Federal Reserve Bank of Kansas City, stated that due to persistent concerns about inflation remaining too high, the Fed should keep rates at a "somewhat restrictive" level. He suggested that further rate cuts could allow high inflation to persist. Conversely, Federal Reserve Governor Michelle Bowman indicated there were still several reasons why lowering rates might be necessary.
Simultaneously, a significant negative development emerged for dollar-denominated assets. According to recent reports, Amundi, Europe's largest asset manager with assets under management of 2.8 trillion euros (approximately 23 trillion yuan), stated it will continue reducing its exposure to U.S. dollar assets, shifting focus towards Europe and emerging markets.
Amundi, Europe's largest asset management institution, recently announced it will persist in decreasing its risk exposure to U.S. dollar assets, reallocating towards European and emerging markets. The Financial Times quoted Amundi CEO Valérie Baudson saying that over the next year, Amundi will advise its clients to reduce their holdings of dollar assets. She cautioned that if U.S. economic policy does not change, "we will continue to see a weaker dollar."
Baudson stated, "For the past 12 to 15 months, Amundi has strongly advocated for investment diversification and advised clients to spread their investments... In the coming year, we will continue to recommend that clients diversify their portfolios." As Europe's largest asset manager, its massive scale of 2.8 trillion euros was supported by a record net inflow of 88 billion euros for the year. The company also announced a 5 billion euro share buyback program.
Amundi is the latest major investment institution to explicitly state plans to cut or hedge its exposure to U.S. assets. In January, Alecta, Sweden's largest private pension fund, mentioned that due to the "unpredictability of the U.S. government and the growing U.S. debt," it had sold most of its U.S. Treasury holdings over the past year.
Baudson explained that over the past year, international investors initially hedged against dollar depreciation by buying gold, which largely explains the significant rise in gold prices during that period. The company subsequently observed a growing desire for investment dispersion to achieve asset diversification, citing an over-concentration in dollar assets.
The Financial Times reported that these capital movements are already driving flows into European and emerging market assets, including bonds and stocks. Last year, emerging market equities had their best performance since 2017.
Why the aggressive selling? Recent data shows Wall Street investors are accelerating a shift towards international markets. According to Morningstar Direct, investors poured a net $51.6 billion into international equity ETFs in January, a significant jump in monthly inflows since the end of 2023. Analysts point to high U.S. equity valuations, a weaker U.S. dollar, and new opportunities emerging in overseas markets as reasons for this shift, with investors betting that the U.S. market's leading advantage will narrow.
Based on Amundi's projections, U.S. real GDP growth is expected to slow significantly to 1.6% by 2026, far below the nearly 3% level seen in 2023-2024. This deceleration is not seen as a cyclical inventory adjustment but is driven by deeper structural factors.
First is the exhaustion of private demand: Amundi believes the lagged effects of the high-interest-rate environment will eventually materialize, compounded by inflation eroding real purchasing power, causing the U.S. consumption engine to stall.
Second is the diminishing marginal utility of fiscal stimulus: Although the U.S. deficit remains high, its contribution to growth is weakening, instead manifesting more as inflationary pressure and debt interest burdens.
Finally, policy uncertainty: The unpredictability of U.S. tariff policy creates significant uncertainty for corporate capital expenditure outside of AI, suppressing investment appetite.
In this context, the dual advantages of U.S. dollar assets—growth superiority and interest rate differentials—are simultaneously fading.
More critically, the correlation between the U.S. dollar, U.S. stocks, and U.S. Treasuries is undergoing a fundamental reversal. In the past, when U.S. stocks fell, the dollar often rose due to its safe-haven status, providing a natural hedge for international investors.
Now, however, due to concerns about U.S. fiscal sustainability, the dollar is beginning to move in tandem with risk assets: when U.S. Treasuries are sold off (yields rise), the dollar does not strengthen as expected but instead weakens due to credit concerns. This implies the dollar is no longer a stabilizer for investment portfolios but has become an amplifier of volatility.
Amundi's call to reduce U.S. asset exposure has found resonance with other major asset management firms. This includes U.S. bond giant Pimco, which stated last month that "unpredictable" policies are pushing markets into a phase of "diversification away from U.S. assets" in the coming years.
Natasha Brook-Walters, head of the $70 billion multi-asset strategies team at Wellington Management, said she is expressing concern about the dollar by buying other currencies such as the euro and Australian dollar. She added, "We are optimistic about emerging markets and increased long positions at the start of this year."
Becky Qin, a fund manager at Fidelity International, stated that within the $7 billion in assets she manages, she has "significantly reduced" dollar exposure, adding that she "still expects the dollar to weaken."
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