Early morning, a massive decline across the board! Over 140,000 people liquidated! A giant with 23 trillion suddenly started selling off. What happened?

The style of the U.S. stock market has suddenly changed.

After a gap-up overnight, major indices plummeted across the board, with the Nasdaq dropping nearly 1% intraday, the Russell 2000, which mainly consists of small-cap stocks, falling over 1% at one point, and all closing lower. Software stocks led the decline, with the iShares Expanded Tech Software Sector ETF (IGV) down 2.55%, ServiceNow dropping over 5%, and Salesforce falling more than 4%. Some Wall Street analysts warned that concerns over AI (artificial intelligence) impacts are intensifying, and the software industry could be eroded by AI-driven workflows, which may affect the industry’s valuation multiples.

Additionally, the cryptocurrency market also experienced heavy selling, with Bitcoin briefly falling below $66,000, dropping over 4% at one point. As of the time of writing, the decline narrowed to 1.74%; Ethereum and SOL both fell over 3%. According to CoinGlass data, in the past 24 hours, a total of 144,691 traders were liquidated, with total liquidation amounting to $458 million.

On the news front, U.S. non-farm payrolls far exceeded expectations, reducing traders’ bets on the Federal Reserve cutting interest rates this year. On February 11, Eastern Time, Kansas City Fed President Jeff Schmid stated that due to ongoing concerns about persistently high inflation, the Fed should keep interest rates at a “slightly restrictive” level. Further rate cuts could lead to sustained high inflation. Fed Governor Michelle Bowman said there are still many reasons to lower rates.

Meanwhile, there was major bad news for dollar assets. The latest reports indicate that Amundi, Europe’s largest asset manager with €2.8 trillion (about RMB 23 trillion) in assets under management, plans to continue reducing its exposure to dollar assets and shift toward European and emerging markets.

€23 Trillion Giant Sells Off Dollar Assets

Recently, according to Xinhua News Agency, Amundi announced it will continue to reduce its risk exposure to dollar assets and reallocate toward Europe and emerging markets.

The Financial Times quoted Amundi CEO Valérie Baudson as saying that over the next year, Amundi will advise clients to reduce holdings of dollar assets. She warned that if U.S. economic policies do not change, “we will continue to see the dollar weaken.”

Baudson said, “Over the past 12 to 15 months, Amundi has been actively promoting diversification and advising clients to diversify investments… In the coming year, we will continue to recommend portfolio diversification.”

As Europe’s largest asset manager, with €2.8 trillion in assets, this was driven by a record €88 billion in net inflows throughout the year, and the company also announced a €500 million share buyback plan.

Amundi has become the latest major investment institution to explicitly state plans to cut or hedge its U.S. asset exposure. In January, Sweden’s largest private pension fund, Alecta, said it had sold most of its U.S. Treasuries over the past year due to the “uncertainty” of U.S. policies and the growing U.S. debt.

Baudson noted that over the past year, international investors initially hedged dollar depreciation risk by buying gold, which largely explains the significant rise in gold prices during that period. The company later found that investors sought diversification to avoid overexposure to dollar assets.

The Financial Times reported that these capital flows have driven investments toward European and emerging market assets, including bonds and stocks. Last year, emerging market equities experienced their best performance since 2017.

Why the Heavy Selling?

Latest data shows that Wall Street investors are accelerating their shift toward international markets. According to Morningstar Direct, in January, investors net flowed $51.6 billion into international stock ETFs (about RMB 356.7 billion), a significant increase since late 2024. Analysts suggest this shift is driven by high U.S. stock valuations, a weakening dollar, and new opportunities abroad, with investors betting that the U.S. market’s lead will diminish.

According to Amundi’s forecast, the U.S. real GDP growth rate will slow sharply to 1.6% in 2026, well below the nearly 3% levels of 2023–2024. This slowdown is not just a cyclical inventory correction but driven by deeper structural factors:

First, the exhaustion of private demand: Amundi believes the lagged effects of high interest rates will eventually manifest, combined with inflation eroding real purchasing power, causing the U.S. consumer engine to stall.

Second, diminishing marginal utility of fiscal stimulus: although the U.S. deficit remains high, its impact on growth is weakening, instead manifesting as inflationary pressure and increased debt service costs.

Third, policy uncertainty: unpredictable U.S. tariffs and trade policies create significant uncertainty for corporate capital expenditures outside of AI, suppressing investment willingness.

In this context, the dual advantages of dollar assets—growth and interest rate differentials—are both fading.

More critically, the correlation between the dollar and U.S. stocks and bonds is undergoing a fundamental reversal: historically, when U.S. stocks declined, the dollar often rose due to its safe-haven status, providing natural hedging for international investors.

But now, due to concerns over U.S. fiscal sustainability, the dollar is showing signs of moving in tandem with risk assets: when U.S. Treasuries are sold off (yields rise), the dollar does not strengthen as expected but weakens due to credit concerns.

This means the dollar is no longer a stable portfolio hedge but an amplifier of volatility.

Amundi’s call to reduce U.S. assets has been echoed by other large asset managers, including Pacific Investment Management Company (PIMCO), which last month stated that Trump’s “unpredictable” policies are pushing markets into a “phase of divestment from U.S. assets and diversification” over the coming years.

Wellington Management’s head of multi-asset strategies, Natasha Brook-Walters, said she is expressing concerns about the dollar by buying euros and Australian dollars. She added, “We are optimistic about emerging markets and increased long positions earlier this year.”

Fidelity International fund manager Becky Qin said she has “significantly reduced” her dollar exposure among her $7 billion assets under management and added that she “still expects the dollar to weaken.”