Chris Wood urges shift from US to India, China amid tariff tension, dollar decline, earnings slump

Jefferies strategist Chris Wood has advised investors to scale back exposure to US equities and instead increase allocations to India and China, citing growing signs of economic strain in the US and a weakening dollar. In his April 24 edition of the Greed and Fear note, Wood highlighted that “investors should use any rally in US equities as an opportunity to reduce exposure,” and redirect funds towards India, China, and Europe, which are better positioned for growth.

The note flagged that parts of the American economy may already be in recession and pointed to Donald Trump’s apparent retreat on tariff tensions with China. “Trump does not have the cards in his tariff game with China,” Wood wrote, noting that while the US President has claimed ongoing negotiations, Beijing has been firm in denying any such talks without a rollback of existing tariffs.

Backing the case for a pivot to Asian markets, Greed and Fear reiterated that the US dollar has entered a long-term downtrend. “A major decline in the US dollar has begun,” it said, calling the recent pullback a mere correction of an overvalued currency. This currency shift, combined with weak corporate earnings, adds to the bearish case for US equities.

“The Citigroup US earnings revision index has now been in negative territory for 17 straight weeks since mid-December,” Wood pointed out. The latest reading for the week ended April 11 was -0.62—the lowest in five years. The index reflects net EPS estimate revisions, with a negative print indicating more downgrades than upgrades for listed US companies.

According to Wood, there are concerns that a recession may already be underway in parts of America. This fear has been noted by several analysts, including Goldman Sachs, which has raised the probability to 35% over the next 12 months. 

The International Monetary Fund (IMF) has also mentioned this possibility in its latest economic forecast. The recent data suggests that the subprime American consumer has been experiencing a recession for some time, with estimates indicating that the top 10% of Americans are now responsible for 50% of consumption, as stated in the Greed and Fear note.

The note pointed to rising financial stress among American consumers, citing a Federal Reserve Bank of Philadelphia report from April 9 that showed that the share of credit card borrowers making only minimum payments has climbed to a 12-year high. JPMorgan also reported that charge-offs in its credit card segment—loans deemed unrecoverable—rose to 3.58% in the first quarter of 2025, marking a 13-year high.

Meanwhile, as Donald Trump nears the 100-day mark in office, his handling of the economy is drawing lower marks from the public. A Reuters/Ipsos poll showed that only 37% of respondents approve of the President’s economic performance, despite Trump repeatedly highlighting a fall in consumer prices.

However, Wood pointed to a different aspect. In his note, Wood raised concerns about an impending downturn in the United States. The note highlighted a growing consensus of evidence indicating a significant decline in economic activity, surpassing the implications of retail sales data to emphasize a clear deterioration in the US economy.

The US and China engaged in discussions on Thursday in an effort to address the ongoing trade conflict between the two largest economies in the world, as stated by President Donald Trump. The details of the talks were not immediately disclosed, but President Trump informed reporters at the White House that meetings had taken place that morning with Chinese officials.

China responded to President Trump's earlier assertion that a trade agreement with Beijing was nearing completion. Following the imposition of 145% tariffs on Chinese goods by the White House earlier this month, China retaliated with its own tariffs and imposed restrictions on the export of critical minerals to the U.S. Additionally, China issued a warning earlier this week that it would take retaliatory measures against any countries entering into trade agreements with the U.S. that are detrimental to Beijing's interests.