Are Foreign Investors Fleeing U.S. Assets?

Serena Tang, Morgan Stanley's Chief Cross Asset Strategist, discusses declining demand for U.S. assets on July 9th. While high-frequency data shows a decrease in demand for U.S. stocks, Tang argues this is exaggerated. Data from Lipper and Treasury TIC indicates a slowdown in foreign investment but not significant net selling. Instead, investment is shifting towards European equities, with approximately $37 billion flowing into Europe-focused equity funds year-to-date, significantly higher than previous years. While allocation to U.S. stocks has decreased, this is partly due to the U.S. holding a smaller share in global equity indices. Some investors are also choosing to invest in international equities excluding U.S. stocks. Tang concludes that this trend is likely to continue due to policy uncertainty, but complete drying up of demand is unlikely in the next year.