The jolt came from a couple of directions at once. The U.S. president’s on-again, off-again tariffs and planned fiscal policy forced investors to wonder whether Treasuries and the dollar are going to continue to be the haven they’ve been for decades. Meanwhile, Germany promised hundreds of billions of euros in spending on defense and infrastructure after Trump made clear the United States would no longer serve as the main guarantor of European security.

The combination of trends suggests that time is up for the era when America, at the heart of global financial markets and trade, sucked in trillions of dollars from the rest of the world. Now investors are looking for alternative places to take their cash in a direct repudiation of Trump’s policies and unpredictable style of governing. Some of the biggest names in finance are positioning for more gains in Europe. Vanguard International favors short-dated bonds in the Eurozone, with the central bank free to cut interest rates. Goldman Sachs Group Inc. sees the euro rising to US$1.20 as the dollar’s appeal wanes. Citigroup Inc.’s Beata Manthey, who in October called the stock rally in Europe, this week downgraded U.S. equities to neutral while maintaining her positive outlook on Europe.

To be sure, the outlook for Europe itself has become more complicated over the past few months as well. Trump’s tariffs have punctured the optimism that greeted Germany’s decision last month to kick off a spending spree, a vital fillip for enduring growth across the whole bloc. And a potential U.S. recession would drag other economies down with it—including the European Union’s (EU’s)—hampering the euro and riskier European assets.

But European markets still have much in their favor, a sign that a long-term rotation of cash into the region may only just be getting started. To the continent’s politicians and central bankers, the disintegration of U.S. exceptionalism is a prime opportunity for the euro to make headway as a reserve currency, eating away at the dollar’s long-standing hegemony.

The U.S. dollar—typically a haven asset in bouts of market turmoil—fell to a fresh six-month low on Monday, as the Trump administration’s latest back-and-forth on tariff policy added to investor unease toward U.S. assets.

German bonds, or bunds, have proved a place of safety amid the tumult. As the yield on U.S. 10-year Treasuries soared half a percentage point in just five days, the equivalent German yield resisted being dragged higher. Although Treasuries have stabilized this week, the price swings have been severe enough to leave market participants on watch for Federal Reserve intervention.

And where a potential inflation spike threatens to curb the Fed’s ability to cut interest rates, the European Central Bank (ECB) has a clearer runway to do so. Money markets are confident that a quarter-point reduction is coming from the ECB tomorrow, with at least another two moves by year-end.

“Today, we prefer to be in bunds,” said Nicolas Jullien, global head of fixed income at investment manager Candriam, commenting on the firm’s favored haven assets. While Germany is set to ramp up bond sales, “the level of debt is very low and I think it should outperform in the risk-off market compared to Treasuries.”

There’s also a growing realization, grounded in the EU’s cohesive response to the pandemic in 2020, that the bloc is stronger than it once was, which helped limit the blowout in yields of debt-laden countries like Italy in the recent volatility. The EU is “more resilient than in the past, and that should also be good for investment flows, at least in relative terms,” said Vasileios Gkionakis, senior economist and strategist at Aviva Investors.

European stocks are luring investors fleeing the volatility that’s convulsed U.S. markets. A Bank of America Corp. global fund manager survey this week found that a record number of respondents intend to cut exposure to U.S. stocks.

The S&P 500 is down 7.9 percent this year, including dividends, versus a 10 percent return in dollar terms for the Stoxx Europe 600 Index. Yet, judging by price-earnings ratios, European stocks still look like a bargain: They’re almost 30 percent cheaper than U.S. stocks, a much wider gap than the average 17 percent discount that goes back a couple of decades.

Amundi SA, Europe’s largest asset manager, is among those favoring European equities. Chief investment officer Vincent Mortier says the continent is well-placed to capture inflows as the global trade system is rewired. “Moments like these only happen once every 100 or 200 years,” he said in an interview. “Europe is back on the map.”

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