How Do Foreigners Feel About The US Stock Market?
Over the past few months, I have included fund flow data in my column in an
effort to give readers some sense of investor attitudes towards equities. This
data suggests that investors are in fact cautious about stocks, despite recent
concerns about excessive bullish sentiment. My observations, however, have only
included domestic investors–including retail and institutional–and not foreign
investors. As such, today I would like to examine how our friends overseas feel
about US equities.
According to the most recent data from the Federal Reserve, foreigners are
the least enthusiastic investment group about owning US equities. So far this
year, this investor class has only purchased $9 billion worth of stocks. This
amount is roughly 35% of what it was during the same period last year and 12% of
what it was in 2000. Despite the performance of the S&P 500
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economy, foreigners are now less willing to commit to equities. But this can be
construed as a good thing since outside investors have historically been the
poorest market timers–which makes sense considering their limited ability to
gauge the domestic economic climate.
Edward Allen