The world’s money managers are back buying US funds. Investors from all over are putting their investment money into US financial assets. This means the world market remains confident that the US still holds the best chance to pull out of the Covid-19 pandemic.
Money Managers Pour $900 Billion Into the US
According to data from Refinitiv, global money managers placed more than $900 billion into US mutual and exchange-traded funds during 2021’s first half. This is the largest amount foreign investors have poured into the US since 1992. This amount also exceeds the total investments made anywhere else in the world.
The investment inflows helped support the recent US stocks rally. The US stock market remains way ahead of the European and Asian markets in growth. For example, the S&P 500 already gained more than 17% while setting new highs. In contrast, Germany’s DAX only posted 14% growth, while Asian exchanges like the Shanghai Composite added 2.2% while Japan’s Nikkei Stock Average posted negligible changes.
Slowdown by End of First Half
By the end of the first half, inflows into the US market cooled down as investors shifted to other markets. June posted only $51 billion in foreign investments, down from $168 billion in May. June also recorded the first sub-$100 billion inflow since January. Meanwhile, inflows to foreign markets increased from $84 billion in May to $93 billion in June.
Despite the downshift, money managers remain highly optimistic about the US's chances of recovery. Even as COVID-19 resurges, along with inflation and the Fed’s policy shifts, many believe the US can emerge the winner. In contrast, many countries continue to struggle with recurring waves of new variants or managing incoming vaccine supplies.
Money Managers to Park Another $200 Billion This Year
As many analysts recommend parking cash into US equities, expect foreign investors to place another $200 billion within the year. According to Goldman Sachs, global investors already placed $712 billion in 2020. This helped push foreign holdings of US government bonds to their highest levels by May.
According to Jack Janasiewicz, Natixis Investment Managers portfolio manager, “The US economy has a head start coming out of this pandemic. There’s plenty of optimism from our standpoint as to why the market can continue to walk up.”
But Why the US?
The surging US economy plays a contrast on the more volatile outlook for other markers. Economists predict that the American economy will grow 6.9% in 2021, which is way higher than the EU, UK, and Japan. Even as the US proceeds with caution, its steady growth rate still outpaces everybody else’s.
This is what makes US bonds attractive to money managers worldwide. In fact, US bonds comprise around 70% of the value of positive-yielding bonds among a group of 10 countries. In addition, a dollar decline also reduced the cost of protecting foreign debt holdings, making them even more attractive.
Watch the Inside News as investors pour more money into US stocks than China's as interest comes:
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