Investors at Milken Conference Shift Focus to Europe Amid U.S. Uncertainty

In an annual gathering that has become a staple for global elites, the Milken Global Conference, held in May, brought together top minds to address pressing global challenges and explore emerging opportunities. This year's event, however, was marked by a notable tension between the views of U.S. Treasury Secretary Janet Yellen and other attendees regarding the future of U.S. and international investments.

Yellen, who delivered a keynote speech, urged investors to maintain confidence in the U.S. economy, emphasizing its resilience and long-term growth prospects. She highlighted that the U.S. market has historically rebounded from short-term shocks, including the 2008 financial crisis, and predicted that U.S. GDP growth could approach 3% by the end of next year. However, her message was met with skepticism by many attendees who expressed concerns about the U.S. economy's trajectory and the impact of the Trump administration's trade policies.

The conference, held in Beverly Hills, California, saw a diverse group of Wall Street traders and global investors discussing financing, selling company assets, and the latest industry sentiment. The overriding theme was the uncertainty surrounding the U.S. economy and the potential for a recession, driven by the Trump administration's trade policies. Many attendees argued that the current market volatility was pushing them to consider increasing their allocations to non-U.S. assets, particularly in Europe.

Purnima Puri, a managing partner at HPS Investment Partners, noted that while her firm has traditionally favored the U.S. market, the current environment has made European markets more attractive. She pointed out that the historical preference for the U.S. is shifting due to the improving growth prospects and lower inflation risks in Europe. This sentiment was echoed by other attendees, who saw the current market conditions as an opportunity to diversify their portfolios away from the U.S.

Andre Loesekrug-Pietri, an entrepreneur, made a bold statement by wearing a green baseball cap with the phrase "Make Europe Great Again," a playful jab at Trump's "Make America Great Again" campaign. His gesture underscored the growing sentiment among attendees that Europe's economic prospects were becoming more favorable compared to the U.S.

Several bankers at the conference saw the current market conditions as an opportunity to adjust and diversify their portfolios, reducing their exposure to U.S. assets. Lee Kruter, a partner and credit chief at GoldenTree Asset Management, highlighted that the focus has shifted to Europe due to its better growth prospects and lower inflation risks. He noted that the initial optimism about the U.S. economy has waned, and investors are now looking at Europe as a more attractive investment destination.

Saira Malik, the chief investment officer at Nuveen, echoed these sentiments, stating that as long as trade uncertainty persists, non-U.S. assets are likely to continue outperforming. She acknowledged that in the long term, U.S. assets, particularly in the tech sector, may still outperform other regions. However, the immediate focus remains on navigating the current uncertainties.

Beyond trade issues, the conference also touched on the long-term fiscal outlook of the U.S. The rising government debt has raised concerns about the sustainability of U.S. assets. Alan Schwartz, the executive chairman of Guggenheim Partners, warned that the foundations of the dollar and the U.S. Treasury market have been weakening for years and need urgent attention. Mnuchin, the former U.S. Treasury Secretary under Trump, emphasized the importance of maintaining the dollar's status as the global reserve currency, noting that any loss of confidence could lead to significant financing challenges.