Investors across the board are re-evaluating their investment portfolios in response to the volatile trade tariff landscape
Institutional Investors Adjust Portfolios in Response to U.S. Trade Policies
In the second quarter of 2025, institutional investors have been actively making changes to their portfolios in response to U.S. trade policies, particularly those related to ongoing tensions with China.
According to a pulse survey carried out in Q2 2025 and involving 132 institutional investors and 22 institutional consultants who collectively manage or oversee more than $4.9 trillion in assets, many investors have been reducing exposure to trade-sensitive assets, increasing cash holdings, hedging dollar exposure, and rotating from growth to value stocks and defensive sectors.
Approximately half of global institutional investors have cut exposure to assets vulnerable to trade disruption, with 56% of Asia-Pacific investors doing so. Around 40% increased their cash allocations, and 44% hedged against the U.S. dollar as part of their risk management strategies. Additionally, 41% are shifting their equity investments from growth stocks to value stocks and defensive sectors, aiming to protect against volatility and inflation risks associated with U.S. tariffs and protectionist policies.
The market experienced significant volatility early in Q2 following tariff announcements, leading to a drop in equity indices and increased market stress. However, equities partly rebounded by the quarter's end as some tariffs were paused and corporate earnings remained resilient. This uncertain environment has caused institutional investors to be cautious, with many expecting structurally higher inflation and slower growth due to ongoing U.S. protectionism.
Europe-based investors appear even more pessimistic than their U.S. and Asia-Pacific counterparts, with 65% bearish on U.S. equities and 82% expecting a shift away from U.S. Treasuries and the dollar in response to these policies.
In summary, the key portfolio adjustments by institutional investors in Q2 2025 due to U.S. trade policies include:
- Reducing exposure to trade-sensitive assets globally, especially in APAC
- Increasing cash allocations
- Hedging against dollar exposure
- Rotating portfolios from growth to value and defensive sectors
- Being more cautious on U.S. equities, especially among European investors
These shifts reflect an effort to build greater resilience against the ongoing uncertainty and risks stemming from U.S. protectionist trade measures and unsettled China-U.S. trade relations.
Furthermore, 32% of global investors think the U.S. and China will fail to agree on a trade deal. Concern about a no deal scenario is highest among European investors, with 40% expecting significant upheaval.
These findings suggest that institutional investors are taking a proactive approach to managing their portfolios in the face of ongoing trade tensions and uncertain economic conditions.
[1] CoreData U.S., Pulse Survey Q2 2025 [2] Financial Times, "Institutional Investors Shift Portfolios Away from U.S. Equities", June 2025 [3] Bloomberg, "Investors Increase Cash Allocations in Response to U.S. Trade Policies", June 2025 [4] Reuters, "Global Investors De-Risk Portfolios as U.S.-China Trade Tensions Intensify", June 2025
Investors, guided by their business strategies, are actively modifying their portfolios, focusing on reducing investments in trade-sensitive assets, increasing cash reserves, and hedging dollar exposure. Additionally, the trend toward rotating from growth to value stocks and defensive sectors is prevalent, aiming to finance operations more securely amidst the uncertainties created by U.S. trade policies.
