(The opinions expressed here are those of the author, a

columnist for Reuters.)

By Jamie McGeever

ORLANDO, Florida, April 28 (Reuters) - The panic selling

of U.S. stocks and bonds following the Trump administration's

'Liberation Day' tariff bombshell may be over, but the re-rating

of American assets is just getting started.

The question is just how big this reallocation will be.

Money managers are aware that even a modest reduction in

exposure could have a potentially huge impact on asset prices.

That's both because of the sheer size of U.S. markets

relative to total global assets, and the outsized nature of

overseas investors' U.S. holdings in nominal terms and as a

share of their portfolios. In Treasuries, this overweight

exposure is large; in equities it is massive.

To illustrate the big impact that even small changes in

allocations could have, it's worth recalling some of the numbers

involved here.

For instance, the global pension fund industry, which is

significantly overweight U.S. assets, is worth around $58.5

trillion.

Foreign private sector investors have flooded U.S. markets

in recent years, pouring a net $3.25 trillion into U.S. assets

over the last three full calendar years, according to U.S.

Treasury data. Consequently, America's net international

investment position is currently negative $26 trillion.

U.S. stocks accounted for as much as 75% of the $80 trillion

global market cap earlier this year. And at the end of last

year, foreign investors owned 18% of U.S. stocks, a record-high

share going back to 1945, according to strategists at Goldman

Sachs.

Additionally, Japanese and euro zone investors' U.S. fixed

income allocations comprise around 60% of their foreign fixed

income holdings and about 15% of their total fixed income

portfolios, according to strategists at Exante Data. European

investors' U.S. allocation has roughly doubled over the last

decade, they note.

PENDULUM SWUNG TOO FAR?

Looking ahead, the concern is not that we will see blanket

selling of U.S. assets by foreign investors or that the dollar

will no longer be considered the world's reserve currency. Those

scenarios will probably not happen in our lifetimes.

But we are likely to see modest shifts that could have major

price impacts. Anecdotal evidence suggests some Canadian and

European pension funds that have baulked at the Trump

administration's trade, economic and wider policy agendas, have

already started reducing exposure to U.S. assets. They won't be

the only ones.

"I think the coming months will see global portfolios

moderately reduce U.S. allocations, more so overseas investors

than domestic U.S. investors," says Rebecca Patterson, former

chief investment strategist at Bridgewater Associates.

If global investors do trim their U.S. holdings, there will

be both a one-off hit to asset prices and a long-term reduction

in upside potential because the level of future demand will be

weaker.

This will be mitigated if U.S. investors fill the gap. But

that could be difficult.

At the end of last year, U.S. households' equity holdings as

a share of their total assets and total financial assets were at

record highs of 29.5% and 43.5%, respectively. Exante Data's

team notes that around 95% of U.S. investors' fixed income

holdings are already allocated domestically.

The 'anti-U.S.' pendulum may have swung too far in recent

weeks. Bank of America's April global fund manager survey found

that a record share of investors intend to cut their U.S. stock

holdings, the U.S. corporate profit outlook is the gloomiest

since 2007, and the outlook for the U.S. dollar is the most

bearish since 2006.

The risk premium on U.S. markets has risen, with bond yields

up and the 'term premium' on the U.S. 10-year Treasury note the

highest in a decade. And for good reason, given the volatility

seen since President Donald Trump's April 2 tariff announcement.

Prices are adjusting, as they should. How long that

adjustment will take and how deep it will be remains to be seen.

The unmatched depth, liquidity and dynamism of U.S.

financial markets are not in doubt. But in the new world order

fast emerging from the Trump administration's 'America First'

drive, U.S. assets' relative attractiveness certainly is.

(The opinions expressed here are those of the author, a

columnist for Reuters.)

(By Jamie McGeever

Editing by Bill Berkrot)