Significant number of foreign investors hesitant to invest in the U.S., warns veteran investor Rebecca Patterson.

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Global investors are re-evaluating their positions in U.S. markets, according to economic expert Rebecca Patterson. Patterson, the former chief investment strategist at Bridgewater, suggests that investors are gradually decreasing their exposure to U.S. assets, which could have significant repercussions. Her insights follow discussions at last week’s meetings of the World Bank and International Monetary Fund in Washington.

“There are many foreign investors concerned not only about tariffs but also about America’s reliability as a partner,” Patterson noted on CNBC’s “Fast Money.” Beyond the current administration’s tariff policies, she observes a growing skepticism among foreign investors and policymakers regarding the U.S. and its approach to capital markets.

This reassessment may put global investors’ U.S. holdings at risk, Patterson warns. As of June, foreigners held over $31 trillion in U.S. assets, marking an increase of $4.4 trillion from the previous year. The rise can be attributed to the record highs of U.S. markets, driven in part by major tech companies and the advancements in artificial intelligence.

“They are now reconsidering their significant U.S. allocations and suggesting a potential reduction—essentially implementing a risk premium on U.S. assets due to increasing uncertainty,” she remarked.

Even a small decrease in global investment could pose challenges for U.S. markets. “Imagine you’re the chief investment officer of a major overseas pension fund or sovereign wealth fund. A 4% shift might result in $1.2 trillion leaving the U.S.,” Patterson explained.

This potential sell-off represents 2.3% of the S&P 500’s total market capitalization as calculated at the close of last week. However, Patterson emphasizes that such capital flight won’t occur immediately.

“Investment committees will take time to deliberate on these decisions. They will convene, seek board approval, and then implement changes. This signifies a gradual decline in support for U.S. markets, with funds possibly being redirected to domestic markets, alternative opportunities, or assets like gold,” she added.

So far in 2025, U.S. stocks have generally underperformed compared to international equities, with the S&P down 4.7%. In contrast, Europe’s broad-based STOXX 600 index has increased by 5.7% this year, while the MSCI AC Asia Pacific Index has risen by 2.4%, according to FactSet.

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