As global investors grow jittery over U.S. trade volatility, they're quietly rotating capital into Japan—powering a stealthy "Ninja Rally" that's outpacing Wall Street's swagger. Meanwhile, Bridgewater's complete exit from U.S.-listed Chinese stocks adds urgency to this eastward move.

Investors from Asia and the Middle East are dialing back U.S. exposure amid rising tariff uncertainty and policy turbulence. Partners Group says some clients—even sovereign funds—are demanding euro-denominated accounts and non-U.S. custodians "in case it all goes crazy," citing fears of financial fragmentation under the current U.S. administration. Investors are deliberately dialing down U.S. exposure, spooked by policy zigzags and tariff risks.

The move signals growing fears over U.S. stability and could fragment the global financial system.

The trend isn't limited to regional players. In a bold pivot, Bridgewater Associates— once a stalwart in China equity investing — has completely offloaded its entire U.S.-listed China equity portfolio—about $1.4 billion across 16 stocks including Alibaba Group Holding Ltd BABA BABAF, JD.com Inc JD and Baidu Inc BIDU and Nio Inc NIO. The move signals rising investor caution and underscores Japan's newfound appeal as a safer, more stable alternative.

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While U.S. markets wobble, Japan is on a stealth boom. Since early April's "liberation day" tariff headlines, foreign investors have been net buyers, propelling the TOPIX to record highs before a modest pullback.

Analysts say this rally differs from 2024's exporter-led surge: now, foreign funds, domestic institutions, and retail investors are all engaged, helped by governance reforms and a U.S.-Japan trade deal that was less severe than expected.

The gap shows in U.S.-listed ETFs: As of Sept. 2, the SPDR S&P 500 ETF SPY is up 9.02% YTD, while the Invesco QQQ ETF QQQ 10.39%.

U.S. megacaps are mixed:

Japan-linked U.S. listings are stronger:

Global allocators reducing U.S. exposure and favoring Japan could keep pushing Japanese equities higher, especially in currency-hedged ETFs and financial stocks tied to rising JGB yields.

For U.S.-focused portfolios, this is a signal to stress-test home bias, track trade headlines, and consider whether Japan's stealth rally is a tactical trade—or a structural shift.

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