A wave of volatility in U.S. equity markets has driven investors toward crypto vehicles, with digital asset funds recording a record $7.05 billion in net inflows in May.

Speaking at a financial conference, Michalis Persianis, Chairman of Cyprus’s Fiscal Council, said “US equities are now unpredictable and entail unknown risks,” noting that capital is shifting toward alternative hedges like crypto.

The trend comes amid heightened market instability following President Donald Trump’s surprise tariff announcement on April 2. The S&P 500 fell nearly 10% over two trading days after Trump pledged sweeping new tariffs. The CBOE Volatility Index (VIX) spiked to the mid-50s, a level not seen since the March 2020 Covid crash, signaling intense investor anxiety.

Bitcoin ETFs Inflows

Investors have increasingly turned to digital assets not only as a growth play but also as a hedge against inflation and erratic fiscal signals. Traditional equity funds, particularly those focused on U.S. large caps, have seen outflows as market sentiment weakens.

Persianis noted that part of the traditional equity allocation “is being partially replaced by alternative hedges,” suggesting the shift could be more structural than cyclical.

Michalis Persianis, Source: LinkedIn

The realignment follows a year of uneven macroeconomic signals and speculation around the 2025 U.S. presidential election, which has added a fresh layer of uncertainty to the outlook for American markets.

Rising Deficits and Shifting Trade Policies

Persianis’ comments resonate with a recent report by the Financial Times, which highlighted a complicated situation in the US equity market.

Rising deficits, shifting trade policies, and a weaker dollar have prompted some to question whether American exceptionalism in markets has ended.

The latest warnings stem from mounting policy uncertainty tied to a potential change in administration. The US fiscal deficit continues to grow, and further stimulus proposals could push debt even higher.

Shift Focus to Global Stocks as US Outlook Weakens

A separate report by Business Insider added that fund managers are turning away from US equities in favor of international stocks, citing growing risks from trade policies and a potential global recession.

Citing Bank of America survey, the report showed that a majority of investors now expect international stocks to outperform US peers over the next five years.

The survey revealed that 54% of global fund managers believe international equities will be the top-performing asset in the years ahead. Just 23% expect US stocks to lead performance, while a combined 18% picked bonds or gold as their preferred long-term bet.

Source: Finance Magnates