(Bloomberg) -- From ditching US stocks for Chinese peers to buying the yen and the euro, traders are running for cover as they ponder how a US markets meltdown may unfold.

Steady selling in US stocks turned into a stampede on Monday as recession jitters spread across Wall Street. Risk aversion spilled into Asia, and growing conviction that US exceptionalism is over spurred a rush into the relative safety of the yen, Australian government bonds and the offshore yuan.

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It’s been a dizzying turn of events for investors accustomed to years of US tech gains and a resurgent dollar. A $1.1 trillion selloff in the Nasdaq 100 Monday underscores how President Donald Trump’s America First policies have, paradoxically, spurred a shift away from US assets. The euro has jumped about 7% from a February low while a gauge of Chinese stocks in Hong Kong is up 20% this year.

“Markets right now are like Olympic-level tennis except we, traders, are the ball,” said Calvin Yeoh, portfolio manager at hedge fund Blue Edge Advisors Pte. in Singapore. Yeoh likes long-dated Treasuries and is bearish on US stocks, though “with moderate commitment” amid volatile markets.

A Bloomberg dollar gauge edged lower on Tuesday and Treasuries were mixed. Pierre Chartres at M&G Investments said government bonds in developed countries are a “good risk-off hedge.”

In Europe, a seismic shift in the region’s stance on defense spending — with Germany leading a push for billions of euros of investment — has reignited bets on steeper yield curves. In the FX market, it’s spurred upgrades on the euro’s path and has already pushed the currency to around $1.09, the highest since November.

“US exceptionalism is starting to unravel — you want to preserve capital in this environment,” said Kellie Wood, money manager at Schroders Plc that oversees over $1 trillion globally. The fund last month flipped from buying the dollar to favoring the yen and euro, and is bullish on short-dated Treasuries and Australian government debt, she said.

The Swedish krona has also benefitted from Germany’s plans to ramp up defense spending, given the nation’s military industry is seen as a major beneficiary of any funding increase. It’s up 7.5% against the dollar so far this month, the best-performing Group-of-10 currency.

China Overweight

The pivot has been clear in stocks, where rising fears of a slowdown fueled a 3.8% plunge in the Nasdaq 100 on Monday — the biggest one-day drop since 2022. Nasdaq futures climbed on Tuesday.

Economic data give credence to the worries: US unemployment rose to 4.1% in February, while consumer spending fell by the most in nearly four years in January. Comments by Trump that the US could face a “period of transition” and Treasury Secretary Scott Bessent’s remarks that there could be “a detox period” are also encouraging traders to reduce US exposure.

Strategists and money managers are rewriting their playbooks.

George Efstathopoulos, a portfolio manager at Fidelity International, added German midcaps late Monday, betting on the country’s fiscal stimulus to help the industrial sector.

Citigroup Inc. downgraded US equities to neutral from an overweight position, while simultaneously upgrading China to overweight. Morgan Stanley Investment Management favors companies and countries in Southeast Asia, while T. Rowe Price Group Inc. and aberdeen Investments like European stocks.

The developments are only adding to two-decade market veteran Li Minghong’s conviction that much of the valuation boost in US stocks has been “froth,” and that offshore Chinese shares offer better value.

“As global investors retreat from US stocks, one obvious destination where valuations are still recovering from a trough is China,” said Li, a fund manager at Beijing Yikun Asset Management Co.

An index of China’s seven tech heavyweights, including Alibaba Group Holding Ltd. and Tencent Holdings Ltd., has rallied more than 30% this year while a gauge tracking the Magnificent Seven stocks has lost 15%.

Caution is also prevailing at Emmer Capital Partners Ltd. in Hong Kong, where Manishi Raychaudhuri sees increased volatility for all risk assets.

“The single most important dampener is President Trump’s apparent lack of concern about how the economy or the stock market does in the near term,” said Raychaudhuri, chief executive officer at Emmer Capital. “US treasuries, money market funds and some investment grade bonds in Asia” seem to be the only hiding places in the near term.

It’s been a terrible first quarter for the dollar. Is this the start of a much bigger dollar decline or will the greenback soon be resurgent? Share your views in the latest MLIV Pulse survey here.

--With assistance from April Ma, Winnie Hsu, Matthew Burgess and David Watkins.

(Updates prices throughout, adds additional context from paragraph six.)