Rising tensions over Greenland are accelerating a shift that was already underway: a slow reordering of the global economy that has long placed the United States at its core.
For decades, investors have treated America as the market of last resort when uncertainty surges—home to the world’s deepest pools of capital, the most liquid government bond market, and a currency that anchors global trade and finance. Recent moves suggest that assumption is being tested.
President Trump’s confrontational approach to trade and foreign policy is pushing some governments and investors to hedge their exposure to the U.S.—by exploring alternative investment destinations, increasing defense spending, forming new trade partnerships, and reconsidering whether the U.S. should remain the central economic reference point for their long-term planning.
Tuesday’s trading offered an early signal of what that shift could look like.
Equities fell globally, but U.S. markets took some of the steepest hits: the Dow Jones Industrial Average dropped 871 points, or 1.8%, the S&P 500 fell 2.1%, and the Nasdaq slid 2.4%. Bonds sold off worldwide, lifting the yield on the benchmark 10-year Treasury to just under 4.3%. The dollar extended recent declines.
What stood out most was the combination of weaker Treasurys and a softer dollar. In past episodes of stress, investors typically rushed toward U.S. government debt and the greenback. On Tuesday, flows appeared to move in the opposite direction.
“The U.S. is plainly for a lot of international investors becoming a less friendly place to do business with, and that is likely to have an impact on investment decisions going forward,” said Shaun Osborne, chief currency strategist at Scotiabank.
The scale of the American economy makes it difficult to meaningfully damage—let alone displace—its position quickly. Previous calls to “sell America” fizzled last year, and major stock indexes were still reaching fresh highs just last week. Even so, the risks are mounting, economists and market watchers say.
Adam Posen, president of the Peterson Institute for International Economics, argues the backdrop now differs from last year. He pointed not only to the intensifying Greenland tensions, but also to U.S. military intervention in Venezuela, the Justice Department’s probe of Federal Reserve Chair Jerome Powell, and new tariff threats aimed at European countries despite previous deals.
“I think there is a much better chance that we’re going to look back and say this was the turning point,” he said.
Posen’s concern is that Washington’s actions could weaken a long-standing foundation of the global system. The U.S. played a central role in expanding trade and providing security that supported cross-border commerce. In exchange, America benefited from relatively cheap financing, strong foreign investment, and the dominant role of the dollar.
If global investors increasingly seek safety elsewhere, the consequences could be significant. The U.S. could face less foreign capital, greater inflation pressure, and a reduced ability to finance its debt on favorable terms—forces that could eventually drag on living standards.
A world where the U.S. no longer sits at the center could also become more fragmented. In a multipolar system—where the U.S., China, and Russia each exert influence over their own economic and security spheres—competition could intensify, and outcomes could become less predictable and more unequal.
Even if America’s safe-haven status erodes slowly, warning signs have been visible for years, said Robert Barbera, an economist at Johns Hopkins University. Tariff shocks in the past and the U.S. debt load have already been on investors’ radar. And with stock prices stretched, markets may be more vulnerable to a sudden change in sentiment.
“This market can fall a lot before anybody can stand up and say, ‘God, do they look cheap,’” Barbera said.
One widely watched valuation gauge—economist Robert Shiller’s metric comparing the S&P 500’s price to the past 10 years of inflation-adjusted earnings—has climbed to its highest level since the dot-com era. Outside that period, valuations have rarely been this elevated across Shiller’s 145-year dataset.
Signs of expensive pricing extend beyond equities. In credit markets, the spread between yields on high-yield corporate bonds and comparable Treasurys has tightened close to its narrowest level since 2007, according to the Ice BofA High-yield Index.
With assets priced for optimism, the worry is that any broad reassessment of U.S. risk—especially by international investors—could trigger a sharper selloff than markets have grown accustomed to, with real economic fallout.
The stock rally of the past year has supported consumer spending, particularly among higher-income households. Capital has also poured into Artificial-Intelligence projects, aided by debt financing and buoyant valuations in AI-related stocks. That investment has helped lift gross domestic product.
“Stocks are priced for near perfection,” said Bob Doll, chief investment officer at Crossmark Global Investments. Strong earnings and lower interest rates have helped support that pricing, he said—but “the high-risk part of it is that you can’t have anything go wrong.”
One data point catching attention Tuesday: reports that a Danish pension fund serving academics and teachers plans to sell its U.S. Treasurys—an example, market participants say, of how quickly sentiment can shift.
By itself, the fund is unlikely to move markets, said Brent Donnelly, president of Spectra Markets. But it hints at a broader scenario: if larger pension systems in places like Sweden or the Netherlands made similar choices, the cumulative impact could become meaningful.
The U.S. still offers what investors value most—deep, liquid markets and historically strong returns, Osborne said. Walking away from that requires a powerful reason. But as long-standing alliances and assumptions “continue to be chipped away at,” he added, more investors may decide to allocate less of their capital to the U.S. over time.
