The US economy relies heavily on foreign investment in various assets, including stocks and government bonds. However, evidence suggests that global investors are reevaluating their exposure to US markets.
According to senior fellow Brad Setser at the Council on Foreign Relations, foreign holdings of US assets amount to around 60-70% of the country’s gross domestic product. Private investors hold most of these assets, seeking to make a profit. However, this trend may be reversing as foreign investors reassess their US exposure.
Recent analysis by Morgan Stanley found that foreign investors gradually reduced their presence in the US stock market since January but remained committed to bonds. However, industry reports suggest a possible shift, with some outflows observed in US Treasuries and high-yield bond funds.
Mark Williams, chief Asia economist at Capital Economics, believes global investors fear the current administration’s economic policies will undermine the US economy. As a result, they may withdraw from US markets to minimize potential losses.
This shift could have significant consequences if enough foreign investors exit bonds, particularly Treasuries. Higher interest rates would increase borrowing costs for companies and mortgages, which could exacerbate an already slowing economy.
If foreign investors continue to pull out of the market, it could signal a major problem for the US economy, highlighting the importance of maintaining global confidence in US assets.
Source: https://www.marketplace.org/story/2025/04/14/foreign-investors-us-corporate-bonds-treasuries-stocks-investment-equities