Edward Conard

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Europe is now a corporate also-ran. Can it recover its footing?

AI Summary. Europe's share of the world's largest companies has fallen sharply, with European firms accounting for 41 of the top 100 global companies in 2000 but 15 two decades later. The decline is attributed to mismanagement, concentration in slower-growing industries, and few new firms in dynamic sectors.

Economist Staff The Economist
Date Posted:
July 6, 2021
Is Database:
Database

Europe’s corporate influence has waned significantly over the past two decades. In 2000, 41 of the top 100 global firms were European, but by 2021, this number had dropped to 15.

Why has Europe's share of the world's largest companies fallen?

Core argument: European firms made up 41 of the world's top 100 global companies in 2000 but only 15 by 2021, and Europe's share of the combined value and profits of the world's 1,000 largest listed firms has halved since 2000.

Europe's corporate influence has waned significantly over the past two decades. In 2000, 41 of the top 100 global firms were European, but by 2021, this number had dropped to 15. Similarly, Europe's share of the combined value of the world's 1,000 largest listed firms and their profits has halved since 2000. While Europe's top 100 firms increased in value from $4.6tn to $8.9tn, American counterparts surged from $7.4tn to $26tn. This decline is attributed to factors such as mismanagement, a focus on slower-growing industries, and a lack of new firms in dynamic sectors. The rise of China and the dominance of American firms have further marginalized Europe, challenging its ability to shape global business norms and maintain strategic autonomy.

Takeaways by Macro Roundup® AI

  1. European firms made up 41 of the world's top 100 global companies in 2000 but only 15 by 2021, and Europe's share of the combined value and profits of the world's 1,000 largest listed firms has halved since 2000.
  2. Europe's top 100 firms rose in value from $4.6tn to $8.9tn while their American counterparts climbed from $7.4tn to $26tn.
  3. Europe's corporate decline is attributed to mismanagement, concentration in slower-growing industries, and a shortage of new firms in dynamic sectors, alongside the rise of China and the dominance of American firms, challenging Europe's ability to shape global business norms and maintain strategic autonomy.

The Economiston Europe's anemic economic performance relative to the United States, "...In recent decades companies such as Nokia, Nestlé or bp have been among the world’s ten biggest firms by market capitalisation. Now only on occasion does Europe have a firm in the top 20 globally. In 2000 nearly a third of the combined value of the world’s 1,000 biggest listed firms was in Europe, and a quarter of their profits. In just 20 years those figures have fallen by almost half.... At the start of the 21st century 41 of the world’s 100 most valuable companies were based in Europe (including Britain and Switzerland but excluding Russia and Turkey). Today only 15 are...American firms have reinforced their position at the vanguard of global business. European ones, alongside those from Japan, have not. In 2000 Europe had a share of corporate wealth commensurate with its roughly one-third of the world economy. That is no longer true...In 2000 the 100 biggest firms in Europe were worth $4.6trn, rising to $8.9trn now. America’s equivalent companies started at $7.4trn but are now worth $26trn. (China’s top 100 firms are worth $8.8trn....In the past 20 years, in absolute terms Europe has added as much additional economic output as America—roughly $10trn each. (China added $14trn by growing at a faster rate but from a smaller base.)That is partly because of Europe’s larger population. European gdp per head is about two-thirds that of America...."

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 1


Economist Staff, "Europe is now a corporate also-ran. Can it recover its footing?The Economist, June 5, 2021, https://www.economist.com/briefing/2021/06/05/once-a-corporate-heavyweight-europe-is-now-an-also-ran-can-it-recover-its-footing

In 1984 a besuited 20-something American executive on a visit to France offered Europeans a few tips for corporate success. Entrepreneurs needed to be given a second chance if they failed and government bureaucrats made for lousy investors, he told a television interviewer. His advice was sage. But European companies ruled the global corporate roost alongside those of America and, occasionally, Japan. Why should they take advice from this uppity Californian newcomer?

Nearly four decades later the company founded by that young upstart, Steve Jobs, is worth more than the 30 firms in the German blue-chip dax index combined. Its value is not far off that of all 40 companies in France’s cac index. Apple’s success has been notable, but it is the decline of corporate Europe that is truly striking. At the start of the 21st century 41 of the world’s 100 most valuable companies were based in Europe (including Britain and Switzerland but excluding Russia and Turkey). Today only 15 are (see chart 1).

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 2


When it comes to business, Europe used to pack a punch. In recent decades companies such as Nokia, Nestlé or bp have been among the world’s ten biggest firms by market capitalisation. Now only on occasion does Europe have a firm in the top 20 globally. In 2000 nearly a third of the combined value of the world’s 1,000 biggest listed firms was in Europe, and a quarter of their profits. In just 20 years those figures have fallen by almost half. Europe is a place for companies such as Amazon and TikTok to find customers, not a base for local firms to conquer the world.

Some of Europe's lost stature is down to the rise of China. But American firms have reinforced their position at the vanguard of global business. European ones, alongside those from Japan, have not. In 2000 Europe had a share of corporate wealth commensurate with its roughly one-third of the world economy. That is no longer true (see chart 2).

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 3


Some Europeans might ask: et alors? Many on the continent are ambivalent about big business, preferring a dense collection of midsized firms, such as the German Mittelstand, to corporate goliaths. But if it continues, the waning of Europe’s business will bring consequences. Big firms invest in innovation, which boosts economic growth. Left to regulate only foreign groups, Europe’s ability to shape global business norms—on privacy, say, or the uses of artificial intelligence—will look weak. European policymakers’ cries for “strategic autonomy” will come to nothing without corporate backing.

Plenty of European companies still make consumers swoon. lvmh of France flogs Louis Vuitton handbags from Beijing to Buenos Aires; German cars and Swiss pharmaceuticals are sought-after around the world; and homes are stocked with products made by Unilever, an Anglo-Dutch giant, and ikea, a Swedish forest-feller. But look at who dominates the global corporate economy, and Europe’s geopolitical rivals now prevail.

When it comes to big business, America, the spiritual home of free-market capitalism, has been on top for decades. It is the ascent of Asia that has rejigged the global corporate landscape. China’s rapid economic growth has spawned corporate titans to match. Over 160 of the world’s 1,000 most valuable firms are now Chinese, a fourfold rise in two decades.

Ne me quitte pas

Assuming that Chinese firms would have gate-crashed the Fortune Global 500, which ranks the world’s biggest companies by revenue, in relative terms it was inevitable that some Western firms would be nudged out of the global elite. That left European firms vying with American ones to stay dominant. It is in this tussle that Europe has fallen by the wayside. In 2000 the 100 biggest firms in Europe were worth $4.6trn, rising to $8.9trn now. America’s equivalent companies started at $7.4trn but are now worth $26trn. (China’s top 100 firms are worth $8.8trn.)

How did European companies fall behind their American competitors? The first reason is that its firms seem to have been outmanaged. Look at firms competing in the same sector over the past 20 years, and incumbent American companies more often than not went on to churn out bigger profits and are better positioned for future success than their European counterparts.

There are many exceptions to this rule: Siemens of Germany has outshone its industrial rival General Electric, for example, and Airbus, based in France, has had fewer problems of late putting jets together than Boeing, its American foe. But by and large it has been better to bet on Nike of America over Adidas of Germany; JPMorgan Chase in New York over Credit Suisse in Zurich, or America’s Walmart over France’s Carrefour. Their advantage in terms of profits and sales growth is often small, but compounds over time.

A second reason Europe fell behind in recent decades is that its biggest firms are in the wrong industries. The sectors European firms dominated 20 years ago, such as insurance or telecoms, have grown at a glacial pace. Even if European firms did well, as many did, they mattered less as the world moved on. America, by contrast, had already made significant inroads into software and e-commerce, industries that would soon redefine the global economy and generate trillion-dollar valuations.

The third, and most striking, reason Europe has fallen behind is the lack of newly created firms in its blue-chip indices. Many of the biggest companies in America, such as Amazon, Netflix, Tesla or Facebook, are young enough to be run by their founders. In Europe old names prevail.

Of the world’s 142 listed firms worth over $100bn, 43 were set up from scratch in the past half-century, 27 in America and ten in China. Only one was in Europe: sap, a German software group founded in 1972. Half of Europe’s richest ten billionaires inherited fortunes spawned long ago; in America nine of the top ten are wealthy solely because of companies they founded.

Many—but by no means all—of the American newcomers are in tech. That has led policymakers and business leaders in Europe to make light of the problem. The failure by France or Germany to build big new firms is regrettable, they concede, but America has merely stolen a march in the consumer-internet realm. Silicon Valley was the right place to be at the right time to build this new generation of firms: a felicitous nexus of universities and research institutes, venture capital and America’s consumer-first reflexes. When that bubble bursts, new business models will emerge that Europe will be ready to seize.

It’s more fun to compute

In fact, the absence of European tech giants is symptomatic of an entrepreneurial deficiency that transcends the world of apps and clicks. America’s nous at creating new companies—and Europe’s failure to match it—extends beyond Silicon Valley, argues Thomas Philippon of New York University.

A global chain of cafés might have been expected to hail from Italy, home of the espresso and barista. Instead Starbucks has overrun the world, despite America’s reputation for insipid coffee. A green car giant should have emerged from Europe, which has a proud engineering tradition and is at the forefront of environmental regulation. Yet it is an American newcomer, Tesla, that is now worth roughly as much as every other American and European carmaker combined. Why could Britain’s or Switzerland’s storied financiers not have created an asset-management giant to dominate the markets? Today it is BlackRock, set up in 1988, which manages $9trn of global investments from New York.

Each of these has found success in its own way. But a combination of factors helped propel them to global corporate superstardom. The ability to raise ample capital, from private investors to large pension funds, is a recurring theme in America that is all too often missing in Europe. So too is the belief that a company that develops a better product will, eventually, displace incumbents, however powerful.

The balance is unlikely to shift in Europe’s favour any time soon. The pipeline to become the world’s next trillion-dollar company is stuffed with firms from America and China, not Britain or Spain. According to PitchBook, a data provider, in the past decade venture capitalists have backed 661 companies that went on to be worth over $1bn. Only 78 of these “unicorns” are in Europe, worth 8% of the 661 firms’ over-$2.5trn total.

Disentangling the cause of Europe’s corporate malaise from its consequences is tricky. One reason frequently cited is the economy: how could European companies be expected to do well when the European economy fared so poorly since 2000? And indeed its share of global gdp has trended down (see chart 3) as emerging markets have grown faster. But that offers only a partial explanation.

Europe is now a corporate also-ran. Can it recover its footing?: Extended Excerpt Image 4


In the past 20 years, in absolute terms Europe has added as much additional economic output as America—roughly $10trn each. (China added $14trn by growing at a faster rate but from a smaller base.) That is partly because of Europe’s larger population. European gdp per head is about two-thirds that of America. The figure has not fallen in the past 20 years thanks mostly to poorer eastern Europeans getting closer to Western income levels.

Looking at European gdp as a whole assumes firms there have access to the entire economic zone. Too often they do not. In theory the eu offers its firms and citizens a “single market” stretching across much of the continent (though no longer to Britain, one of the biggest economies). In practice it is a part-built edifice. It is still fiddly for a bank in Portugal to offer services in Finland—much harder than for a Californian bank to expand to Texas.

Beyond linguistic and cultural differences, legal complexities often get in the way. “When companies think of their home market, they usually think of their home country, not of Europe,” says Carl-Henric Svanberg, chairman of Volvo, a Swedish lorry maker, and of the European Round Table for Industry, which represents large companies.

These internal barriers mean Europe has many smaller firms operating at national, not continental, scale. Each country tends to have its own banks, utilities, airlines and supermarkets. (Europe has over 100 mobile operators, compared with a handful in America or China.) These lack the economies of scale and opportunities to grow quickly enjoyed by firms plying the American or Chinese markets.

In the absence of easy opportunities at home, European firms have expanded overseas more zealously than their American counterparts. Firms in richer countries in Europe, the source of most of its multinationals, now generate over half their income elsewhere, up from just over a quarter in 1997, according to Morgan Stanley, a bank. That includes around a third from poor countries; large German firms now sell more to emerging markets than they do domestically. American groups generate over 70% of their income locally. That can make managing European companies a case of constantly putting out fires in far-flung subsidiaries.

At home, European companies complain that they face a less favourable business environment. Europe’s brand of capitalism is often softened by a stronger role for unions. That has its allure, as workers toil shorter hours and enjoy greater job security. It also means higher labour costs. The political protection afforded businesses—from hostile takeovers, say, which are rare in mainland Europe—is one reason their financial results are underwhelming.

Europe’s smaller firms now find themselves competing against global behemoths with inbuilt advantages. Large firms can afford to buy and try new technology, borrow at cheaper rates and absorb fixed costs more efficiently. They tend to spend relatively more on research and development. The dearth of big companies helps explain why European spending on research, at 2.1% of gdp, is below the average of the oecd, a group of mostly rich nations.

Que reste-t-il de nos amours?

Even as Europe has fallen out of business league tables, it has continued to play a role as a global regulator. Sometimes that has seemed its main contribution to the global business landscape: look at rules on privacy or combating climate change. Because standards set by the European Commission are often the most stringent in the world, and businesses want to build a single set of products for all markets globally, they often end up applying across the world. But eu rulemaking that applies in effect only to foreign firms—as does much of the tech regulation devised in Brussels—has increasingly been attacked as covert protectionism. Currently a rulemaker, Europe may risk losing that position.

European policymakers are well aware of Europe’s relative decline. They point to mitigating factors. Some corporate giants in America profit from areas which in Europe are the responsibility of the state—running hospitals or railways. Others such as airlines and mobile carriers are monopolies that bilk customers. And can profits or market capitalisation truly reflect the value of a company to society?

There has also been a return to European dirigiste reflexes. If the private sector has proved unable to grow firms that are a match for global titans, perhaps politicians can help? More overt intervention by the public sector in the economy—both helping European firms and stymieing their competitors—was increasing before covid-19. The pandemic has turbocharged it.

Under the banner of promoting Europe’s “strategic autonomy”, rules preventing takeovers of some European firms by foreign rivals have been bolstered. Proposals are being developed to hamper foreign companies backed by non-eu governments who wish to do business in Europe—a measure plainly aimed at China. Talk has grown of a “carbon border tax” to ensure European firms are not at a disadvantage when competing against challengers from places with less ambitious climate-protection policies.

France and Germany are among those who have demanded the eu stop blocking favoured mergers of big European firms into pan-continental champions, despite the scepticism of antitrust regulators. Politicians are willing to shovel public money into industry in the hope of guiding its priorities—the idea of “picking winners”, popular in the 1970s, has made a comeback. Myriad state-backed investments are happening in green technologies. France has revived the position of “high commissioner for planning”. Across the continent public funds are being invested in everything from startups to large listed firms.

Hast du etwas Zeit für mich?

Europe’s boosters see plenty of corporate life left there. From utilities to power majors, firms in Europe have gone further than others in greening themselves. Those in other parts of the world will have to follow suit at some point. European universities remain world-class. But Europe also has unique challenges. One is demography: the old continent is living up to its name. There are more over-65s than under-15s nowadays and populists across the eu make it hard to boost immigration.

That leaves few levers to pull to help Europe’s firms compete globally. The most obvious, deepening the single market, has fallen off the political agenda. Helping law firms and software designers sell across the continent seamlessly lacks the pizzazz of picking industrial winners. But stiffening competition in Europe is key to creating firms fit for corporate glory. The path to global business begins at home.

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Showing 247 database articles primarily about Financial Markets

Earnings Will Be Spectacular. It May Not Be Enough

AI Summary. Corporate profit margins, long regarded as one of the economy's most reliably mean-reverting series, have risen continuously so far this century. Measured through the national income accounts used in calculating GDP, profits now take a larger share of the economy than on the eve of the 1929 crash.

John Authers Bloomberg
Date Posted:
October 8, 2026
Is Database:
Database

Since 2000, post-tax corporate profits as a share of GDP have trended upward across cyclical setbacks and are now near an all time high, above their 1929 level.

Have corporate profit margins stopped reverting to the mean?

Core argument: Corporate profits measured in the National Income and Product Accounts take a larger share of the U.S. economy than on the eve of the 1929 Great Crash.

Throughout the 20th century, profit margins were regarded as one of the purest mean-reverting series in the economy. So far this century, however, margins have done nothing but rise. Measured with the National Income and Product Accounts, part of the GDP calculation, profits are currently taking a bigger share of the economy even than on the eve of the Great Crash in 1929. The series comes with a lag, so we can assume the profit share on this basis is comfortably at a record by now.

Takeaways by Macro Roundup® AI

  1. Corporate profits measured in the National Income and Product Accounts take a larger share of the U.S. economy than on the eve of the 1929 Great Crash.
  2. Profit margins were regarded throughout the 20th century as one of the purest mean-reverting series in the economy, yet so far this century they have done nothing but rise.
  3. The National Income and Product Accounts profits series comes with a lag, so the profit share on this basis can be assumed to be comfortably at a record.

Related Articles:

  • US Focus: The Effect Of Soaring Profits — US nominal pre-tax corporate profits in the national accounts grew 23% over the past year, a pace not seen outside post-recession spikes since the mid-2000s. Wider margins were the key driver, as domestic profit growth far exceeded the 8% rise in corporate value added, pushing margins near all-time highs while the labor share hit new lows.
  • The Post‑COVID Decline in the Labor Share — The share of US national income paid to workers fell 1.6 percentage points below its pre-pandemic level, reaching a post-war low. The authors find this decline stems mainly from changes within industries rather than shifts in activity across sectors, following cyclical patterns seen in earlier recessions.
  • Are US Corporate Profit Margins Too High? — US after-tax non-financial corporate profit margins remain elevated by historical standards, estimated at 7.6% versus a post-1949 high of 8.2%, while employee pay as a share of non-financial corporate gross value added has fallen from 66% to 56%. One argument holds that subdued demographic growth leads companies to prioritize maximizing margins over expanding capacity.
  • Financial Markets
  • GDP
  • Productivity
  • Workforce
    • Inequality
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The Bond Market Reckoning Has Only Begun

AI Summary. The gap between French and German 10-year government bond yields has widened at a pace matched only during the euro zone sovereign debt crisis. France and the UK have less room than the US to close deficits with tax increases, as tax revenues equal 43.9% of GDP in France and 35.3% in the UK versus 25.2% in the US.

John Authers Bloomberg
Date Posted:
September 30, 2026
Is Database:
Database

The spread between 10-year French OATs and German Bunds has widened at a pace seen only during the eurozone sovereign-debt crisis. John Authers warns that France “satisfies all the classic conditions for a major debt crisis.”

Do high tax burdens limit France and the UK's deficit options?

Core argument: The spread of 10-year French OATs over German Bunds has risen at a pace matched only during the worst days of the euro-zone sovereign debt crisis in 2011 and 2012, fueling talk of a second crisis centered in Paris.

Only in the worst days of the euro zone’s sovereign debt crisis, in 2011 and 2012, has the [spread of 10-Year French OATS over German Bunds] risen so fast. Talk of a second euro-zone crisis, this time with an epicenter in Paris, is growing, and it’s easy to see why. Why is this more of a problem for France and the UK? Beyond their deficits, they also shoulder much higher tax burdens than the US. Tax revenues are 25.2% of GDP in the US, the lowest of the major developed economies - but 35.3% in the UK and 43.9% in France. It’s hard to imagine after decades of tax-cutting, but a US politician could deal with the deficit fairly easily with a tax hike. It’s not clear that option is open to French lawmakers, even if they could somehow persuade voters to go along with them. The populist politicians of left and right, who currently look well placed in next year’s presidential elections, are in any case unlikely to try.

Takeaways by Macro Roundup® AI

  1. The spread of 10-year French OATs over German Bunds has risen at a pace matched only during the worst days of the euro-zone sovereign debt crisis in 2011 and 2012, fueling talk of a second crisis centered in Paris.
  2. Tax revenues equal 25.2% of GDP in the US, the lowest among major developed economies, versus 35.3% in the UK and 43.9% in France, leaving American politicians more room to close the deficit with a tax hike.
  3. Populist politicians of left and right, currently well placed for France’s presidential election, are unlikely to attempt tax increases to address the deficit.

Related Articles:

  • French PM to Freeze Emmanuel Macron’s Pension Reform Until 2027 — France's prime minister said he would suspend the plan to raise the retirement age to 64 until the next presidential election, while asking parties to agree on other savings. He outlined a €30bn package of spending cuts and tax rises to cut the deficit to 4.7% of national output from 5.4%.
  • Soaring Bond Yields, Gaping Deficits and Towering Debts: What Could Go Wrong? — An analysis of 22 rich countries estimates that if each refinanced its entire debt at current five-year bond yields, Britain would need the largest primary surplus to stabilize its debt-to-GDP ratio, about 1.5%, followed by Italy at 1.4%, France at 1.2% and America at 1%.
  • Global Debt Report 2026 — Gross central government borrowing across OECD countries rose 7% to a record $17tn, about 23% of GDP, and is projected to reach roughly $18tn, or 24% of GDP. The United States and Japan account for close to 80% of the area's refinancing requirements, with the US share rising from 57% to 70%.
  • Financial Markets
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Foreign Capital Flows Into US Stocks Hit Record As Appetite For Debt Fades

AI Summary. Foreign investors made a record $942bn in net purchases of US stocks and investment fund shares over 12 months, the highest rolling 12-month total in Treasury data going back to 1985. Foreign demand for US debt securities moved in the opposite direction, falling to a net $188bn in the second quarter from $314bn in the first.

Michael Taffe and George Steer Financial Times
Date Posted:
September 28, 2026
Is Database:
Database

Foreign investors bought a record net $426B of US equities and fund shares in Q2, up 62% y/y, part of a record $942B in the 12 months through July. Overseas investors bought a net $188B of US debt securities in Q2, down from $314B in Q1.

Are foreign investors shifting from US debt into US stocks?

Core argument: Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, the highest rolling 12-month total in Treasury data going back to 1985.

Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, accelerating a shift in overseas investment towards American stocks and away from debt. The flows represented the highest rolling 12-month total in Treasury data going back to 1985. Net purchases of US equities and investment fund shares by foreign investors jumped to $426bn in the second quarter, up 62% from the same period in 2025, and surpassing the previous quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis. Foreign demand for US debt moved in the opposite direction. Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first.

Takeaways by Macro Roundup® AI

  1. Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, the highest rolling 12-month total in Treasury data going back to 1985.
  2. Net foreign purchases of US equities and investment fund shares reached $426bn in the second quarter, up 62% from the same period in 2025 and above the prior quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis.
  3. Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first.

Related Articles:

  • World’s Unusually High Dollar Exposure Risks Fueling Selloff — Pension funds and insurers in Canada, Denmark, Australia, Taiwan, Japan and Finland hedged just 41% of their foreign-currency exposure, the lowest share since at least 2015. With some of the largest holders of US assets carrying little protection against a weaker dollar, the currency is at risk of steeper declines if sentiment turns.
  • Foreign Investors Prefer US Stocks To Treasuries As Debt Worries Grow — International flows into US stocks averaged 2.8% of US GDP over a year, overtaking flows into US Treasuries at 2% of GDP for the first time this century outside brief episodes during the Covid-19 pandemic and after the global financial crisis, according to Deutsche Bank analysis of US Treasury data.
  • A Catalyst For The AI Bubble Break — Historically, controlling for valuations, a 1% rise in the share of the market represented by initial public offerings has been associated with roughly a 4% decline in prices. With large artificial-intelligence company listings expected and share issuance exceeding buybacks, equity supply could shift from shrinking about 1% a year to growing near 5%, implying returns roughly 20% below average.
  • Financial Markets
  • GDP
    • Savings Glut/Trade Deficit

De-reservification, Not De-dollarization

AI Summary. Much of the official-sector inflow into the U.S. now comes from investors who are not traditional reserve managers, and those flows remain heavily tilted toward the dollar and toward risk assets rather than Treasuries. The author argues this shift in the global investor base helps explain why Treasuries trade at a discount while the dollar retains a premium.

Brad Setser and Alex Etra Council on Foreign Relations
Date Posted:
September 16, 2026
Is Database:
Database

The stock of global dollar reserves has been roughly stable over the past decade. The world is not moving away from the dollar: dollar assets are shifting from official holdings of Treasurys towards private and quasi-sovereign holdings of risk assets.

Why do Treasuries trade at a discount while the dollar keeps premium?

Core argument: Most official-sector inflows into the U.S. come from investors who are not classic reserve managers, and those flows remain heavily tilted toward the dollar, so any real de-dollarization would likely begin among these investors.

Most of the current flow into the US from the “official” sector is coming from investors who are not classic reserve managers. Those flows remain heavily tilted toward the dollar, at least for now. Any real de-dollarization would likely occur first among these investors. Put differently, the dollar’s global role is increasingly as a source of returns, not a source of safety. The foreign bid, private and public, is for risk, not for Treasuries. It is currently fashionable in some circles to point to the diminution of the “convenience yield” on Treasuries even while the U.S. dollar continues to enjoy such a privilege. But the shift in the global investor base and their apparent portfolio preference for U.S. risk assets in lieu of Treasuries may help explain the divergence between the convenience yield on Treasuries and the convenience yield on the USD.

Takeaways by Macro Roundup® AI

  1. Most official-sector inflows into the U.S. come from investors who are not classic reserve managers, and those flows remain heavily tilted toward the dollar, so any real de-dollarization would likely begin among these investors.
  2. The dollar’s global role is increasingly as a source of returns rather than safety, with the foreign bid, private and public, directed at risk assets rather than Treasuries.
  3. The shift in the global investor base toward U.S. risk assets in lieu of Treasuries may help explain the divergence between the convenience yield on Treasuries and that on the dollar, and suggests the “profit dollar” is likely trading at a historical premium.

Related Articles:

  • Financial Innovation and the International Monetary System — The dollar accounts for 59% of cross-border payments messaged through SWIFT, far ahead of the euro's 14%, and its share of foreign exchange turnover has risen gradually to about 90% of the 200% total since 2010. Official holdings of U.S. Treasuries have leveled off near $4tn while foreign private holdings rose from $1tn to over $5tn.
  • Foreign Investors Prefer US Stocks To Treasuries As Debt Worries Grow — International flows into US stocks averaged 2.8% of US GDP over a year, overtaking flows into US Treasuries at 2% of GDP for the first time this century outside brief episodes during the Covid-19 pandemic and after the global financial crisis, according to Deutsche Bank analysis of US Treasury data.
  • World’s Unusually High Dollar Exposure Risks Fueling Selloff — Pension funds and insurers in Canada, Denmark, Australia, Taiwan, Japan and Finland hedged just 41% of their foreign-currency exposure, the lowest share since at least 2015. With some of the largest holders of US assets carrying little protection against a weaker dollar, the currency is at risk of steeper declines if sentiment turns.
  • Financial Markets
  • GDP
    • Savings Glut/Trade Deficit
  • Monetary Policy

Foreign Investors Prefer US Stocks To Treasuries As Debt Worries Grow

AI Summary. International flows into US stocks averaged 2.8% of US GDP over a year, overtaking flows into US Treasuries at 2% of GDP for the first time this century outside brief episodes during the Covid-19 pandemic and after the global financial crisis, according to Deutsche Bank analysis of US Treasury data.

Emily Herbert and Ian Smith Financial Times
Date Posted:
September 15, 2026
Is Database:
Database

International net flows into US equities reached 2.8% of GDP in the year through June, exceeding net inflows into Treasuries of 2% of GDP. Outside brief episodes during the pandemic and the aftermath of the GFC, this is the first time this century that equity inflows have surpassed Treasury inflows.

Are foreign investors now buying more US stocks than Treasuries?

Core argument: Foreign inflows into US stocks averaged 2.8% of US GDP in the year to June, overtaking Treasuries at 2% of GDP, according to Deutsche Bank analysis of US Treasury data.

International flows into US stocks reached 2.8% of US GDP on average in the year to June, overtaking Treasuries — at 2% of GDP — for the first time this century outside brief episodes in the Covid-19 pandemic and the aftermath of the global financial crisis, according to analysis of US Treasury data by Deutsche Bank. The change reflects the ever-growing lure of the US stock market, with the S&P 500 on track for a fourth straight year of double-digit gains. Powering the rally has been vast AI investment, which is driving profit margins to new highs, according to FactSet data stretching back to 2009.

Takeaways by Macro Roundup® AI

  1. Foreign inflows into US stocks averaged 2.8% of US GDP in the year to June, overtaking Treasuries at 2% of GDP, according to Deutsche Bank analysis of US Treasury data.
  2. Deutsche Bank’s analysis marks the first time this century that foreign equity flows have exceeded Treasury flows, outside brief episodes during the Covid-19 pandemic and the aftermath of the global financial crisis.
  3. The S&P 500 is on track for a fourth straight year of double-digit gains, powered by vast AI investment that is driving profit margins to new highs, according to FactSet data stretching back to 2009.

Related Articles:

  • World’s Unusually High Dollar Exposure Risks Fueling Selloff — Pension funds and insurers in Canada, Denmark, Australia, Taiwan, Japan and Finland hedged just 41% of their foreign-currency exposure, the lowest share since at least 2015. With some of the largest holders of US assets carrying little protection against a weaker dollar, the currency is at risk of steeper declines if sentiment turns.
  • Foreigners Rebuff ‘Sell America’ and Buy a Net $1.6 Trillion in Assets — Treasury Department data show overseas investors bought a net $1.55tn of long-term US financial assets, up from $1.18tn the prior year, including $720bn in equities and just under $409bn in Treasury notes and bonds. China was a net seller of $208.6bn, with its Treasury holdings ending at $683.5bn.
  • The Global Balance Sheet 2026: Imbalance And Divergence — Only 20% of global household wealth growth came from net new investment in real assets such as machinery, housing, infrastructure and intellectual property, down from a 30% average over the prior quarter century. Nearly 60% came from asset prices rising faster than inflation and negative net worth in other sectors.
  • Financial Markets
  • GDP

Interest Rates and Stock Prices: An Old Debate Resurfaces!

AI Summary. An estimate of the intrinsic 10-year US Treasury rate, built from actual inflation and real economic growth, far exceeded the actual 10-year Treasury rate after inflation surged, and that gap has since narrowed to roughly 4.75% actual versus 5.41% intrinsic.

Aswath Damodaran Musing on Markets
Date Posted:
September 14, 2026
Is Database:
Database

Damodaran’s “intrinsic” 10-year Treasury rate—calculated as US real GDP growth plus inflation—has broadly tracked the nominal 10-year Treasury yield since 1962. As of early September 2026, the 10-year yield of ~5% was 41bp below his 5.41% intrinsic-rate estimate.

Do long-term Treasury rates line up with inflation and growth fundamentals?

Core argument: As of September 2026, the US 10-year Treasury rate stood at 4.75% while the intrinsic 10-year rate was 5.41%, a gap of 66 basis points.

[The graph shows] the actual inflation rates and real GDP growth rates for the US, going back to 1962, and [the implied] intrinsic 10-year treasury rate (the cumulative column) and actual 10-year treasury rate each year. When inflation surged in 2022, interest rates went up, but since the rates that I am tracking are long term rates, the intrinsic risk free rate vastly exceeded the actual rate that year, but the difference has narrowed over time, and almost dissipated by September 2026 (when the US 10-year treasury bond rate was [5%] and and the intrinsic ten-year rates yielded 5.41%).

Takeaways by Macro Roundup® AI

  1. As of September 2026, the US 10-year Treasury rate stood at 4.75% while the intrinsic 10-year rate was 5.41%, a gap of 66 basis points.
  2. When inflation surged in 2022, the intrinsic risk-free rate vastly exceeded the actual 10-year Treasury rate, and that difference has narrowed since.
  3. The intrinsic 10-year Treasury rate is built from actual US inflation and real GDP growth rates going back to 1962 and compared against the actual 10-year Treasury rate each year.

Related Articles:

  • The Budget and Economic Outlook: 2026 to 2036 — The Congressional Budget Office projects the federal deficit will grow from $1.9tn (5.8% of GDP) to $3.1tn (6.7%) over a decade, above the 3.8% averaged over the past 50 years, with rising net interest costs driving much of the increase. Federal debt held by the public is projected to rise from 101% to 120% of GDP.
  • US 30-Year Bonds Erase Gains From Treasury’s Buyback Surprise — US Treasuries erased nearly all gains that followed the Treasury Department's surprise decision to increase buybacks of longer-dated bonds, with the 30-year yield rising above 5.27% and the 10-year touching 4.71%. The reversal signals the move has done little to ease concern about surging government debt.
  • Annual Economic Report — Public debt in advanced economies has risen steadily, limiting governments' ability to cushion higher energy prices. Cyclically adjusted primary deficits averaged 1.9% of GDP in advanced economies since 2022 versus 1.1% over the two preceding decades, and 1.8% in emerging markets versus 0.1% from 2000–2019.
  • Financial Markets
  • Fiscal Policy
    • Fiscal Deficits
    • Government Spending
  • GDP
  • Monetary Policy
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