Foreign investors reallocating money away from the U.S. could fuel a nearly $1 trillion sell order on U.S. equities, a UBS strategist said Friday.

Gerry Fowler, head of European equity and global derivatives strategy, told reporters on a conference call that just a 5 percentage point shift in U.S. equities they have would lead to that decline.

According to a Federal Reserve report released this week, foreigners held $16.49 trillion in equities as of the end of the fourth quarter. A typical global portfolio of stocks would have roughly two-thirds allocated to U.S. stocks.

Interest in Europe has picked up — the Vanguard FTSE Europe ETF (VGK) has gained 12% this year — as Germany, and the European Union more broadly, aim to boost spending, on defense in particular.

At the same time, the new Trump administration’s on-and-off tariff policy has helped drag U.S. stocks lower, with the S&P 500 entering correction while the Magnificent Seven grouping of tech stocks has entered a bear market.

Deutsche Bank head of currency research George Saravelos made a related point in a note to clients on Friday. Unlike the 2022 sell-off in U.S. stocks, European investors are also getting hit by weakness in the U.S. dollar.

“When ‘bad things’ happen the dollar tends to rally, so unhedged U.S. risky assets have proven a highly attractive portfolio diversifier. Yet this is now changing,” said Saravelos.

Saravelos said the downward repricing of U.S. fiscal, growth and Fed expectations is causing the dollar to weaken alongside U.S. equities, and that rhetoric that challenges the rule of law also may be undermining dollar safe-haven perception.

“If this correlation breakdown between U.S. equities and the dollar continues, it will open up a more structural discussion among European (and global) asset managers on the diversification benefits of unhedged risky-asset dollar exposure,” he said.