Trade Fight = Capital Flight

Callum_Thomas
04-18

I thought it worth highlighting a couple of additional charts I’ve come across that illustrate how this week’s chart may play out.

The first chart shows foreign holdings of US equities vs their total holdings of US financial assets; you can see just how much foreign investors have been crowding into US stocks — just compare and contrast the peak of the dot com bubble vs the depths of the financial crisis. And the reality is foreign flows have been a critical part of the story above; driving things higher on the way up.

But as alluded to, the many minds of markets are beginning to change; global investors are reporting a record high intention to underweight US equities.

$S&P 500(.SPX)$ $SPDR S&P 500 ETF Trust(SPY)$ $NASDAQ 100(NDX)$ $Invesco QQQ(QQQ)$ $Dow Jones(.DJI)$

And in the flows data you can see that this is not just a matter of opinion, they are voting with their feet. Concerns around the prospect of US dollar weakness, still relatively high valuations, policy uncertainty, and recession risk make it an easy and safe decision for many to rotate out of US stocks and either back into their home markets or other assets entirely.

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