‘Sell America’ Volatility Is Quietly Reshaping Bond Portfolios

As debate over the “Sell America” trade intensifies, investors are not abandoning US assets. Instead, they are broadening bond allocations, with emerging market debt and international fixed income gaining momentum.

While headlines have focused on capital rotating out of US equities, some of the biggest portfolio shifts are happening in bonds. According to analysts speaking on CNBC’s ETF Edge, rising volatility, a weaker US dollar, and concentration risks in US stocks are pushing investors to diversify fixed income exposure beyond domestic markets.

Joanna Gallegos, co-founder of BondBloxx, said emerging market bonds have been the strongest performing area in fixed income both last year and year to date. She pointed to solid returns from US dollar-denominated emerging market bond ETFs, helped by currency pressure on the dollar and investors chasing performance rather than turning against the US market itself.

“The dollar pressure is putting more of a view on non-US assets,” Gallegos said, adding that the US remains the core of global portfolios even as investors look abroad for incremental returns.

Data backs that up. According to Morningstar, US market ETFs attracted about $156 billion of net inflows in January, the strongest January on record. At the same time, international equity ETFs saw a record $51 billion in inflows, while taxable bond ETFs pulled in roughly $46 billion, led by broad US bond funds.

Gallegos stressed that the US still offers the deepest and most attractive fixed-income market globally, despite concerns around deficits and heavy government spending. She noted that the yield curve is beginning to steepen in a more typical pattern, with longer-dated yields above short-term rates, creating opportunities across credit markets.

Todd Sohn, technical strategist at Strategas Securities, said the potential shift in fixed income could be even larger than what is happening in equities. He highlighted the trillions of dollars still sitting in money market funds, which could start moving into bonds as central bank rates drift lower.

Importantly, investors may no longer need to take excessive risk to generate income. Gallegos said investment-grade credit, including lower-rated BBB bonds, now offers attractive yields with historically low default risk. She added that bonds are no longer just a defensive allocation.

“Bonds are not just the safety part of your portfolio,” Gallegos said. “They are also the opportunity and income side as well.”

The “Sell America” narrative may be overstated, but it is accelerating a quieter shift. Investors are expanding bond portfolios across geographies and credit types, keeping US assets at the core while seeking diversification and yield in a more volatile world.

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