Risk Management, Trading & Portfolio Strategies

Foreign investment in American securities craters, according to data

Foreign investors sales of U.S. assets are on the rise, but why?

Foreign investors sales of U.S. assets are on the rise, but why?

Demand for U.S. assets by foreign investors has apparently shrunk for the fifth month in a row, according to the U.S. Department of the Treasury.

A report from the federal government showed global investors sold $66.9 billion worth of long-term securities during June 2013. This is a huge increase from May 2013, when $27 billion of assets were discharged on the market. Foreign residents of the United States sold $77.8 billion worth of securities in that month, while net purchases were a paltry $3.8 billion.

What does this mean? It's tough to say, depending on which economist or financial advisor you ask. Some argue that investors are reacting to the shifting climate in the world economy, as the Federal Reserve looks to make its exit and the situation in the European Union deteriorates further. Others suggest that the U.S. economy isn't nearly as strong as it's being depicted, and these investors are merely trying to reduce their exposure should losses begin to mount.

The latter opinion holds weight, especially when you consider that the Fed may find its hands tied once the talk of tapering turns into action. Yet performance in the S&P 500 and the Dow Jones Industrial Average points to the reality that investors – especially those who are combing the markets for profits – are actually responding positively to negative economic news and vice-versa. On August 15, markets actually dipped when better-than-expected unemployment data – signaling some success for the American central bank – was released. 

Investors need to be prepared to do well in an investment environment that is seemingly detached from the fundamentals of growth. SmartStops are risk management tools that help individuals monitor developments in their portfolio in a timely manner so that they can adjust and hedge accordingly. Explore our website further o learn more about why our innovative system is the right choice for you

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