Edward Conard

Top Ten New York Times Bestselling Author

  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is full of substance, it is one of the must-read books of the year, and once I finish it I will be giving it a second read through right away.” - Tyler Cowen, Professor, George Mason University
  • “Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
  • “…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
  • “Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
Upside of Inequality Oxford Unintended Consequences

AI Summary. Foreign net purchases of US Treasuries and equities rebounded and stand near their all-time high, following only modest outflows earlier. This suggests the dollar's decline was driven by a relatively small segment of the market, making price action a noisy proxy for investor sentiment toward the US.

Robin Brooks Robin Brooks Substack
Date Posted:
Is Database:
Database

Net foreign inflows into US assets were near a record high in May. Robin Brooks argues that U.S. exceptionalism is “alive and well,” with the fall in the Dollar likely driven by temporary liquidity issues “at a time of heightened risk aversion.”

Are foreign investors still buying US assets despite the dollar's decline?

Core argument: Foreign net buying of US Treasuries and equities rebounded in May after only tepid outflows in April, with net foreign inflows near their all-time high of July 2023.

The left chart shows that foreign net buying of Treasuries and US equities came roaring back in May, after only tepid outflows in April. The right chart shows that net foreign inflows are near their all-time high of July 2023, which was the peak of the US “exceptionalism” narrative in markets. These flows suggest that the fall in the Dollar may have been driven by a relatively small segment of the market, which is another way of saying that small outflows led to disproportionate moves in global foreign exchange markets. This could reflect thinner liquidity at a time of heightened risk aversion, which is fairly common when markets are turbulent. That makes price action - and the fall in the Dollar - a noisy proxy for what investors really think. They seem to still be very positive on the US.

Takeaways by Macro Roundup® AI

  1. Foreign net buying of US Treasuries and equities rebounded in May after only tepid outflows in April, with net foreign inflows near their all-time high of July 2023.
  2. The July 2023 peak in net foreign inflows marked the height of the US "exceptionalism" narrative in markets, a level May's flows approach.
  3. The flows suggest the Dollar's fall was driven by a relatively small segment of the market, with small outflows producing disproportionate moves in global foreign exchange markets, possibly reflecting thinner liquidity amid heightened risk aversion.

Related Articles:

  • Are Foreigners Selling US Assets? — European and Japanese investors hold roughly 30% and 20% of their fixed income in foreign debt, versus under 10% for US investors, with US bonds making up about 15% of Eurozone and Japanese portfolios. Because foreign investors are less sticky than domestic ones, turmoil in US bond markets has greater potential to unsettle them.
  • The US Trade Deficit and Foreign Borrowing — The authors argue US trade deficits persist because foreign investors find US financial assets attractive, but the current deficit level is not sustainable. They estimate that stabilizing the US net foreign liability position requires improving the trade balance by about 2% of GDP, or over 3% if low-cost borrowing privileges are lost.
  • With a Weakening Dollar, It’s America Second — The S&P 500's record level holds in dollars but not in other major currencies, reflecting dollar depreciation, with non-US stocks outperforming US stocks by about 10 percentage points. The rebound is not driven by the largest tech platforms, whose performance now matches the index's other 493 stocks.
Showing 247 database articles primarily about Financial Markets