You know that scene in Titanic where the ship has already hit the iceberg, water's already pouring in through the bow, but the orchestra keeps playing in the ballroom?
Yeah. UBS just dropped the violin and made a run for the lifeboat.
The downgrade
Andrew Garthwaite, UBS's head of global equity strategy — a guy who's not some basement-dwelling analyst with an Instagram account — downgraded U.S. equities to "benchmark" within a global portfolio. In plain English: the Swiss bank is saying the era of going all-in on America like it's a God-given certainty is over.
And the reasons? It's not just one. It's a nasty combination of factors that, taken together, form a storm the American market may not weather with the same grace it has in recent years.
The dollar: the key piece nobody wants to face
UBS sees the euro hitting $1.22 by the end of Q1 and openly talks about "structural asymmetric downside risks" for the dollar. Translating from econ-speak to human language: the bank thinks the dollar has a lot more room to fall than to rise.
And that matters — a lot. Historically, when the trade-weighted dollar index drops 10%, U.S. stocks underperform by about 4% in unhedged terms. Four percent might look like small potatoes on paper, but when you're talking about trillions of dollars in market cap, that's one hell of a punch.
Meanwhile, look at what's happening out there: the MSCI World ex-US is up 8% in 2026. Japan's Nikkei has surged 17%. The Stoxx Europe 600 is up 7%. And the almighty S&P 500? Basically flatlined. Zeroed out. Parked like a car at a funeral home.
The smart money is leaving the U.S. And when the smart money leaves, the dumb money takes a little longer but follows right behind.
Buybacks: the crutch that snapped
One of the big power moves by American companies in recent years was stock buybacks. Buy back your own shares, shrink the float, inflate earnings per share, investors are happy, stock goes up. Beautiful cycle. Too perfect, actually.
Well, here's the thing: UBS points out that the U.S. buyback yield is now basically in line with global peers. The advantage is gone. And worse: the combined dividend + buyback yield in the U.S. is now half that of Europe.
Read that right? Half.
As Garthwaite put it: "The buyback yield is no longer exceptional, and that was an important driver of fund flows, EPS, and valuations."
When the crutch holding up the patient snaps, the patient hits the floor.
Valuations: paying French champagne prices for generic beer
The sector-adjusted P/E for U.S. stocks is 35% above international peers. The historical average since 2010? A measly 4%. Sixty percent of U.S. sectors are trading not just above global peers, but above their own historical premium.
This isn't optimism. This is complacency.
It's like paying $500 for an all-you-can-eat steakhouse because someone convinced you the ribeye there is magic, when it's actually the same cut you can find for $80 at the butcher shop around the corner.
The Trump factor: political volatility as a governing style
Tariffs that change week to week. Proposals to cap credit card interest rates. Potential restrictions on private equity in real estate. Pressure on drug prices. Threats to cut dividends and buybacks at defense companies.
The Trump administration has turned economic policy into a reality TV episode where nobody knows what's coming after the commercial break. And markets hate uncertainty — especially when it comes from the person who's supposed to be the adult in the room.
But it's not all doom and gloom
Credit to Garthwaite: he hasn't gone full bear. He acknowledges that the U.S. still benefits in the early stages of potential bubbles and that AI adoption over there remains ahead of just about everyone (with the possible exception of China). UBS's year-end target for the S&P 500 is 7,500 — below the strategist consensus (7,629), but it's hardly a doomsday scenario.
The question isn't whether the U.S. is going to sink. The question is whether it still makes sense to have a disproportionate allocation in American stocks when the rest of the world is cheaper, yielding more, and finally waking up.
So tell me: are you still betting all your money on American exceptionalism because you've actually crunched the numbers, or simply because that's what everyone around you is doing?
Because following the herd has historically never been a strategy. It's just the most comfortable path to the cliff's edge.
