Since the election of President Donald Trump three years ago, the fake news industrial complex has portrayed the U.S. as a fallen wasteland, a nation that has metastasized into a dystopian nightmare because of the real estate billionaire mogul’s victory in 2016. The pillars of the legacy media contend in earnest that the president’s pro-business, America First agenda has crippled the United States, isolating it from the rest of the world and creating enemies throughout the globe. Is this even remotely true? Well, to find out, let’s follow the money and determine what the Benjamins are telling us.
They All Inflow Here
Is foreign money crippled at the nation’s boundaries? Or, are investors pouring cash into the economy like Guatemalans crossing the border?
Since January 2017, foreign direct investment (FDI) – investments made by individuals or companies in one country into another market – has been skyrocketing. Although U.S. FDI has tumbled this year due to Chinese divestment, it still hovers near a record high of between $50 billion and $60 billion a month, according to Bureau of Economic Analysis data.
The numbers compiled by the Treasury Department show that there has been a surge of overseas investors buying U.S. equities. In July, holdings of U.S. stocks by foreign private investors soared to a record high of $7.7 trillion, which is more than double the total in 2012.
You can notice the contrast between U.S. and overseas markets when examining exchange-traded fund (ETF) flows. This year, the biggest ETF flows were in the VTI (total U.S. stock market) and VOO (S&P 500), which attracted $13.6 billion and $13.3 billion, respectively. The ETF to experience a contraction was the EFA, which concentrates on publicly traded securities in European, Australasian, and Far Eastern markets. This investment vehicle witnessed an outflow of $9.3 billion.
The fascinating aspect of these trends is what investors are getting from U.S. markets. Typically, when foreigners are diving into a safe-haven market, they are sacrificing higher returns for reassurance that their capital will be shielded from global volatility. However, under today’s conditions, shareholders are receiving both safety and higher returns on their investment – a win-win situation.
Will the good times last forever? The consensus on The Street is that even more outside investors will dive into the New York Stock Exchange to take advantage of the 9.7% growth rate projections in earnings per share (EPS) for the S&P 500 in 2020. Should the White House strike a trade agreement with China before the world shrieks “Auld Lang Syne” out of tune, then returns could potentially be greater than they were this year.
Most of the world’s leading stock indexes have recorded positive returns. The FTSE 100 rose 7%, the Hang Seng edged up 3%, the Nikkei climbed 16% (but can you count this when the Bank of Japan is the top shareholder?), and the Shanghai Composite Index jumped 12%. But the Dow, Nasdaq, and S&P 500 have soared 20% to 30% this year. You cannot stop yourself from falling for the coquettish charms of the siren of the NYSE.
Show Them the Money!
So much for the narrative that foreigners are pulling money out of the U.S. because of Trump. They are still scooping up stocks, they continue to buy Treasurys, and they remain keen on investing in the economy. Sure, they may not appreciate Trump’s unwillingness to concede anything that might contradict America’s interests, but they are too fixated on revenues and profits to care. As long as they see the money, why would they hold a grudge if the president insults their country on Twitter? Show them the money!
Read more from Andrew Moran.