Major Northern European investors are expressing increasing caution regarding the risks associated with holding U.S. assets, citing geopolitical tensions and concerns about the nation’s financial stability. Pension chiefs from Finland, Sweden, and Denmark have indicated they view U.S. foreign policy uncertainty and high levels of White House debt as potential threats to the U.S. dollar, U.S. Treasuries, and stocks. This sentiment signals a potential broadening shift away from the world’s largest financial market. Russell Investments is a Seattle-based investment firm that advises clients with $1.6 trillion of assets and manages $636 billion directly.
Several Nordic pension funds, including Sweden’s Alecta and Denmark’s AkademikerPension, have already taken action by selling or initiating the sale of their U.S. Treasury holdings. Alecta cited increased risks associated with U.S. Treasuries and the dollar as the reason for its sales. AkademikerPension is divesting its holdings by the end of the month, attributing the decision to concerns about weak U.S. government finances. Insurance and Pensions Denmark is a trade body that represents various pension funds, and whose members professionally assess how exposed they should be to the U.S.
While acknowledging that U.S. policy uncertainty poses a risk to asset valuations, the funds clarified they would not withdraw capital for political reasons. They emphasised their investment decisions are not intended to be a form of financial protectionism or a political statement. Despite the concerns, the U.S. remains an investable market, although its risk premium has been rising. Some firms are adhering to their investing mandates, despite U.S. policy uncertainty posing a risk to the dollar.
U.S. policy uncertainty has also contributed to increased interest in assets like gold. Folksam, one of Sweden’s largest insurers, sold its U.S. Treasuries in 2024 partly to mitigate risks ahead of the U.S. election. While some advocate for caution, others advise maintaining a cool head amidst the current market environment. The public discussion surrounding U.S. assets is noteworthy, as investors typically avoid commenting on changes potentially linked to current affairs, preferring to base long-term investment decisions on factors beyond momentary events.
