Earlier this year, the “Sell America” trade was in full force.
It can be argued that the peak of the movement came in April and May, after President Trump’s infamous “Liberation Day,” and as Moody’s downgraded the US’s credit rating.
The yield on the 30-year Treasury bond surged above 5% as foreign investors dumped US government debt, while major stock indexes fell.
That price action appears to have been a fleeting fad, says Torsten Sløk, the chief economist of Apollo Global Management.
In new research for clients over the weekend, Sløk outlined two signs that foreign investors have warmed back up to US assets, as if “Sell America” never happened.
1. Foreign investors are buying US debt
Bloomberg/Apollo Chief Economist
The 10-year US Treasury yield, which trades inversely to the price of the bond, is rising during trading hours in New York but falling outside of trading hours, Sløk said.
This signals that foreign investors have been buyers of US government debt outside of normal American trading hours.
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“Simply put, this shows that domestic investors are sellers of US government debt and foreign investors are buyers,” he wrote. “Unsurprisingly, foreigners like the higher yields they get in the US, including in private credit.”
2. Foreign flows are rebounding
US Department of Treasury/Macrobond/Apollo Chief Economist
There was an uptick in foreign demand for US assets in May and June, despite net selling in April. Foreign investors have mostly piled into Treasury bonds and notes and US equities, per Apollo’s analysis of Treasury Department data.
Foreign investors are likely “very excited” about the US outlook and believe that “some of the most attractive investment opportunities” reside in the states.
“In other words, the ‘sell America’ trade was basically only in April,” Sløk added.
The outlook for US markets has perked up since Liberation Day, with the major indexes climbing to fresh records as Trump locked in more trade deals with other nations and a strong slate of corporate earnings rolled in for the second quarter.
Stocks got another boost on Friday as the Fed signaled it could cut interest rates in September, a long-anticipated catalyst for equities that’s expected to boost asset prices.
