Legendary investor Stanley Druckenmiller is calling on US investors to diversify their portfolios, as more and more market professionals examine what the rest of the world has to offer outside the United States. Among them is the founder and Chief Investment Officer of macroeconomic research firm Damped Spring Advisors, Andy Constan, who began distancing himself from American assets as early as the beginning of last year. “For almost 20 years, certainly since the global financial crisis and after, owning US assets — both stocks and bonds — significantly outperformed assets in the rest of the world,” the Wall Street veteran with 40 years of experience stated in an interview with MarketWatch.
According to Constan, the outperformance of the US was due to a combination of policy and balance. Investors need stocks to benefit from growth and bonds as a “hedge” in case that growth fails to materialize. The right balance comes when both categories offer a satisfactory risk-adjusted return. For the last two decades, European and Japanese bonds offered zero or even negative yields, in contrast to American ones, which were supported by market-friendly policies, loose financial conditions, large-scale asset purchases, and expansionary fiscal policy. This mix of policy and balance led Constan to prefer US assets for most of his career, which began in 1986 at Salomon Brothers, where he led equity derivative sales during the “Liar’s Poker” era. He later worked at the hedge fund giant Bridgewater Associates and managed his own hedge fund. However, as he explains, his stance began to change in early 2025. “The number one factor is the very significant rise in yields on Japanese, German, and generally non-US bonds, which can now offer a substantially positive return in the event of a recession.”
He sees better balance in markets such as the United Kingdom, Canada, and Australia. This overall improvement, he says, may also explain the weakening of the dollar, as international investors repatriate capital outside the US. He started 2025 over-invested in the US, but gradually reduced his exposure, and last month he moved his long-only portfolio — “the classic investment we all make for retirement and the long-term horizon” — entirely outside the US.
Another reason for his shift is the comparison of government policies. As he notes, he finds it difficult to understand the current goals of President Donald Trump. “I read him correctly when he was trying to ‘detoxify’ and shrink the US government in the first half of last year. But I read him wrong on what he is pursuing today. Now he just seems to want to ‘inflate’ the stock market,” he commented. According to him, the policies of large deficits and aggressive monetary easing are no longer an exclusive feature of the US. “It’s not anti-Trump, it’s not anti-America. It’s just that other regions of the world now offer opportunities that haven’t existed for the last 15 years.”
His basic advice to private investors is the use of passively managed funds. “Buy diversified, low-cost stocks, bonds, gold, and commodities on a global scale and go back to your day job. Stop trying to ‘play’ the market because you can’t,” he emphasizes. Constan has a track record of successful predictions, such as in late 2021 when he warned that the Fed’s balance sheet reduction would act as “kryptonite” for assets — with stocks recording heavy losses in 2022. On the artificial intelligence front, he expresses concern when it is combined with distortions in market mechanisms. “There are great uncertainties and, at the same time, the high level of leverage in the financial system due to excess liquidity suggests an increased probability of a large move — either upward or downward.” As he concludes, “whatever asset you’re looking at, investors are on a razor’s edge regarding leverage. This doesn’t mean it will go badly — it could go very well before it goes very poorly.” His final message: “Reduce excessive confidence about the future and position yourselves accordingly — which for most simply means a diversified long-only portfolio.”
