Why top minds at Goldman Sachs say clients aren't giving up on US stocks — yet

• Global equities are getting shelled at the fastest rate in years.
• Some investors are acting like this is the beginning of the end of US market leadership.
• However, clients of Goldman Sachs Asset Management are skeptical of that premise.

Wall Street is in shambles after President Donald Trump announced highly aggressive tariffs, which one analyst remarked were "worse than the worst-case scenario."

US stocks are taking their heaviest losses since the onset of the pandemic five years ago. Major investment firms now say that barring a sudden policy shift, it will be hard to avoid a recession.

But although markets are melting down, not everyone is sprinting for the exits.

Leading minds at Goldman Sachs Asset Management (GSAM) said at their April 3 media day that their clients are taking a wait-and-see approach to US equities after Trump unveiled tariffs.

"We're getting a lot of inquiries, but not a lot of dollars are flowing," Elizabeth Burton, a senior client investment strategist at GSAM, said at the conference regarding US stock outflows.

These high-net-worth investors may be struggling to cope with the idea that US equities' dominant 16-year run could end, even though international stocks have consistently led in 2025.

"Because they are long-term investors, there's still some belief that even if things look murky in the US, the US has done great by them," Burton said. "The US may end up better than other countries on the other side of the tariffs that may suffer more."

A world of pain

Tariffs at the levels Trump outlined would crush the global economy, GSAM's leaders said.

"We view this as a growth shock," Ashish Shah, GSAM's chief investment officer of public investing, said of tariffs. "You can view it as a tax on consumers, and to the extent that other countries impose tariffs on US goods, that's also a tax. So that ends up being contractionary."

Even more frightening is that tariffs drive prices higher, which could create a dreaded stagflation scenario where economic growth falters and price growth takes off.

"The big word of 'stagflation' is real here. These tariffs will be inflationary," said Lindsay Rosner, GSAM's head of multi-asset fixed income. She estimates that Trump's tariffs would add about two percentage points to the inflation rate.

A key rationale for Trump's trade war is that the US has trade deficits with much of the world, meaning that it imports more foreign goods than it exports its own products. Tariffs disrupt this exchange process, which will be a net negative for all — but other nations could be hit hardest.

"When the US runs a deficit — by definition, if the US slows down, the negative impact to the rest of the world is greater than the US is itself," Shah said.

No major economy could escape the ripple effects of an economic downturn in the US, warned Alexandra Wilson-Elizondo, GSAM's co-head of multi-asset solutions.

"Should there be a US recession, and the US sneezes, the rest of the world will be in bed with the flu," Wilson-Elizondo said in written commentary sent to Business Insider on Friday morning.

Is US market leadership on its last legs?

Although US stocks are taking on water, there are a few possible reasons why GSAM clients aren't jumping overboard yet.

While most investors despite tariffs, some believe in Trump's unorthodox plan to use tariffs as a negotiating tactic to score better trade terms, or to bring manufacturing back to the US for good.

"At the heart of the market debate is one camp who believes that this is the unwind of US exceptionalism," Wilson-Elizondo remarked. "And another camp that believes that the short-term actions of the Administration are the cost of maintaining a long-term advantage, and consequently, permanence in US exceptionalism."

Other investors are staying the course because, as Burton noted, US stocks have consistently outperformed since the financial crisis, even through the most dire circumstances.

Perhaps the most compelling explanation for why GSAM clients aren't quitting the US is that there isn't a compelling alternative — at least not within equities. As Shah and Wilson-Elizondo pointed out, international markets may suffer even more than their US counterparts.

When deciding whether to reshape a portfolio centered around US stocks, there are two crucial — and perhaps contradictory — variables to consider: valuations and earnings growth.

US stocks have traded at a massive premium to the rest of the world for the last decade or so, according to Yardeni Research. The gap has narrowed this year, but it's still a significant chasm.

However, that discrepancy stems from the fact that US companies have produced much more consistent and strong earnings growth. Their profit margins also lap those of European firms, reinforcing the notion that American stocks are of higher quality, and therefore worth a premium.

Investors now must decide what's most at risk in the coming economic storm: expensive stocks, or those with lower-quality earnings.