Foreign Investors Shift Preference from U.S. Treasurys to Equities in Historic Capital Flow Reversal
Overseas investors are increasingly favoring U.S. equities over Treasurys, marking a historic shift according to Deutsche Bank's George Saravelos. Foreign holdings of U.S. Treasuries have dropped from more than 50% at their peak to around 30%, while ownership of American stocks has surged. This trend is attributed to strong private sector balance sheets driven by AI and high profit margins, contrasted with deteriorating public finances marked by large deficits. Investor concerns over inflation and rising government debt have led to a global bond sell-off, pushing U.S. Treasury yields higher. The national debt surpassed $40 trillion last month, while the projected fiscal deficit for FY2025 is expected to exceed 6% of GDP. Major foreign holders like China and Norway's sovereign wealth fund are reducing their exposure to Treasurys. BlackRock has also adjusted its portfolio strategy by being overweight U.S. equities due to strong corporate earnings, while underweighting long-term Treasurys as they become less reliable for diversification in the current economic environment.
Tickers: $BLK
Topics: balance sheet dynamics foreign investment government debt Treasury bonds U.S. stocks