pfp Advisory: “Are US stocks still safe?”

Fund manager Christoph Frank is concerned about the increasing legal uncertainty surrounding investments in US companies, and is considering what this means for global investors.
 

January 19, 2026. FRANKFURT (pfp Advisory). About three and a half years ago, under the title “Legal certainty is often not valued,” I addressed what I believe to be an often overlooked aspect of capital investment: How secure is an investor's position when the going gets tough? What options are available to them to enforce their property rights? My conclusion was that, personally, I find it too risky when a state has too much uncontrolled power over companies and uses it unabashedly. After all, no one can guarantee that this state's ban will not suddenly affect my investments as well.

At the time, I would never have thought that I would one day be linking these lines to US stocks. To avoid any misunderstandings from the outset: even after a year of “Trump 2.0,” there is still a world of difference between the situation with Russian assets and that with US stocks. But on a scale from “I'm not worried about legal certainty at all” to “acute danger to my property,” I see US stocks moving a little further toward the right end of the scale compared to their position a year ago.

Why? Because I note with dismay that the Trump administration is openly undermining the principles of the rule of law and control mechanisms, harassing companies via social media posts and decrees, and even increasingly interfering directly with their property rights. For example, Donald Trump wants to prohibit US defense contractors from buying back shares and paying dividends if they fail to get production problems he has observed under control. For credit card companies, he is proposing a cap on interest rates of 10%. He wants to prohibit institutional investors from buying single-family homes. The shares of the companies affected have already reacted accordingly. 

Regardless of how serious Donald Trump really is about such statements and how much of it is simply pandering ahead of the midterm elections in the fall, the mere fact that investors suddenly have to deal with questions of legal certainty in the US speaks volumes and represents a huge change over the past twelve months. Until now, I had only seen this kind of thing in emerging markets or “rogue states.”

In the short term, this may not have a major impact, partly because the US remains a magnet for capital and Europe is unfortunately still struggling to get off the ground. To paraphrase the well-known maxim of the “cleanest dirty shirt”: If I only have worn shirts in my suitcase, then I'll just take the least dirty one, in our case US investments: not perfect, but strong growth, productive, in an environment with a deep capital market and an attractive public spending ratio. Compared to Europe or many emerging markets, these are trump cards that still trump. 

In the long term, however, the balance may look different. Perhaps the most important structural competitive advantages of the US are the rule of law, openness, freedom of research, and a reliable commitment to market economy principles. Trump is undermining all four of these pillars: he disregards the rule of law in both word (“I don't need international law”) and deed, highly qualified individuals are likely to be increasingly deterred by the tightened and often perceived as arbitrary immigration policy, US universities are under constant attack from the government, as is the still independent US Federal Reserve, and in the US economic system, the favor of the ruler is becoming an increasingly important factor for success. 

All of this could further undermine confidence in the US. If the major capital pools were to adjust their strategic positioning to the new risk situation, the fall would be enormous, given that the US accounts for just under 72% of the MSCI World Index at the end of 2025. So far, Germany in particular has done little to take advantage of Trump's “steep passes,” to spruce itself up as an attractive location with a reliable legal framework, and, above all, to implement genuine reforms. After all, in a ten-year and five-year comparison, the DAX is miles behind the leading US index, the S&P 500. But over a two-year or one-year period, the two are already on a par. Perhaps the stock markets will once again prove to be the better early indicators of impending change.