Money is flowing out of Wall Street, so where is it going?

Investors who are dumping American stocks following US President Donald Trump’s global tariff war are turning to the Australian sharemarket as they seek safe havens around the world amid economic volatility.

While the S&P/ASX 200 is down more than 4.5 per cent since Trump’s presidential inauguration on January 20, the local bourse has outperformed the major Wall Street indexes since Trump unveiled a wave of tariffs on so-called Liberation Day earlier this month.

Investors are turning to the Australian sharemarket after Donald Trump unleashed a tariff war on “Liberation Day”. Credit: AP

Fund managers say Australia has benefited from being relatively insulated from the economic instability, despite being slapped with a baseline 10 per cent tariff, and that the local economy is holding up stronger than anticipated.

Between April 2 and the ASX’s close on April 24, the local bourse has lifted 0.43 per cent. Over the same period on Wall Street, the Dow Jones has fallen 5 per cent, the S&P 500 is down 3.3 per cent and the tech-heavy Nasdaq is trading 2.5 per cent lower.

Trump’s fast-paced policy changes have unleashed global market chaos over the past month.

The Australian index has see-sawed, recording its steepest one-day fall in five years followed by the biggest one-day rise in two years the following day earlier this month. Global markets, however, rose late last week after Trump said his tariffs on China would come down “substantially” and that he had “no intention” of firing US Federal Reserve chairman Jerome Powell.

Ten Cap co-founder and portfolio manager Jun Bei Liu said the turmoil was causing investors to flee the US.

Although the IMF last week downgraded Australia’s economic growth forecast for 2025 to 1.6 per cent, down from 2.1 per cent in January, Australia is expected to remain one of the fastest-growing major economies in the developed world this year and next.

The tariffs are predicted to hit the US economy harder. The IMF has slashed the projection for US growth from 2.7 to 1.8 per cent, or about $650 billion in dollar terms.

“The [investor] money is all coming out of the United States,” Liu says. “The US market has historically been the biggest allocation for any portfolio. We are seeing most of them coming out of the US going into equities into Australia and Asia.”

The biggest beneficiary of the trade war is gold, the price of which has soared almost 18 per cent since so-called Liberation Day, and more than 40 per cent over the past year. On the local index, gold miner Northern Star Resources has climbed 15 per cent since April 2; Evolution Mining is up 12 per cent; and Newmont Corporation has lifted 11 per cent.

“The degree of uncertainty in the economic and political spaces are sufficiently high, and that underpins gold,” said ABC Refinery global head of institutional markets Nick Frappell.

“We still see evidence of official sector demand of governments buying gold, and certainly good evidence of Chinese demand.”

‘The US market is very unpredictable, whereas our market has been pulling us higher.’

Moomoo market strategist Jessica Amir

With Trump softening his tone on the imposition of 145 per cent import taxes on China after Xi Jinping slapped 125 per cent tariffs on America, gold prices have slightly pulled back, but Frappell said volatility and uncertainty remained.

Other publicly listed companies to be boosted by the trade war include the Commonwealth Bank of Australia and “defensive stocks” such as Telstra, which have climbed by 6.4 per cent and 2.8 per cent, respectively.

Opal Capital Management founder and chief investment officer Omkar Joshi said CBA, which fund managers had said for a while was overpriced, was seen as a safe investment option, especially among global investors.

“It’s large, liquid, there’s nothing going wrong [at CBA], the earnings are pretty stable, and it attracts flows pretty easily,” Joshi said.

Moomoo market strategist Jessica Amir said the Australian sharemarket was seen as a “defensive player” in the trade war.

“The US market is very unpredictable, whereas our market has been pulling us higher,” Amir said.

“No.1 [performer] are financials because banks are totally insulated from the trade wars, and banks are expected to make record profits in the full financial year. No.2 are gold miners and No.3 industrials because they win regardless of tariffs, trade wars and who wins the [Australian] election.”

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.