In times of instability like the present, where are international investors putting their money to stay safe? According to an analysis by Bloomberg, global traders are increasingly flocking to the crowded trade that is the American market.
In the past month, around $30 billion has flowed into equity funds, with 94% of the allocations pouring into U.S.
assets – especially technology stocks – according to EPFR Global data compiled by TD Securities.
The “buy-America” trade is currently paying off as the S&P 500 index outperformed the rest of the world by the widest margin in 15 months.
Long-term Treasury bonds also saw a 3.5% rally, marking the best period of 2024.
The Allure of U.S.
Markets
Despite concerns about debt issues and political uncertainties with upcoming elections, the U.S.
is becoming increasingly attractive to international investors seeking stability amidst European election stress and China’s monetary struggles.
Foreign interest in the U.S.
credit market remains high, with foreign investors pouring $187 billion into U.S.
company securities in the first quarter of 2024, a 61% increase from the same period last year.
Reports showing a slowdown in U.S.
inflation and few signs of recession have fueled the latest bullish progress, pushing the Nasdaq 100’s total returns, heavily tech-focused, to over 80% since the beginning of 2023.
This has led to a scenario where funds betting on the rest of the world are being overshadowed.
According to Sameer Samana, senior global market strategist at Wells Fargo Investment Institute, the U.S.
remains the most stable country with a combination of AI and technology companies unmatched anywhere else in the world.
This supremacy may continue for a while longer until some of these factors change or a suitable replacement emerges.
In the past week, investors flocked to safe havens like Treasuries, pushing the 10-year bond yields to two-month lows, despite the Federal Reserve signaling a slower pace of interest rate cuts.
Meanwhile, mega-cap tech companies propelled the S&P 500 to its seventh gain in eight weeks, surpassing 5,400 for the first time.
In summary, the U.S.
market’s dominance has been evident recently, with other regions facing challenges.
This trend highlights the ongoing appeal of U.S.
markets for global investors seeking security and stability in uncertain times.
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