Markets have split America in two
Foreign capital has just delivered its verdict on the United States, and the verdict is not what Washington wants to hear. A record $600 billion flowed into US equities over the past year, outpacing foreign purchases of Treasuries for the first time since the 2008 financial crisis. For decades, buying America meant buying its government debt alongside its companies as though they were one…
The United States has become a two-part investment landscape, with its corporate sector and government debt moving in different directions, as reported by the market. A record $600 billion flowed into US equities over the past year, surpassing foreign purchases of Treasuries for the first time since 2008. However, this unprecedented inflow of capital has revealed a growing divide between the country's thriving businesses and its fiscal woes.
The federal deficit is projected at $2.1 trillion for the fiscal year just ending, more than 6% of GDP, and total federal debt has surpassed $40 trillion. Consequently, bond markets are adjusting to the reality that the government's borrowing has outpaced its discipline, rather than reacting to a single data point. Major asset managers have been positioning their portfolios with more weight on US equities and less on long-dated Treasuries, as they recognize the divergence between American business and government.
This shift in perception has transformed bonds from a stabilizing force in a portfolio to just another risk asset, as trust in the government's fiscal path becomes eroded. As a result, investors must reassess where their US exposure lies, as it is no longer as simple as holding a single decision. The United States is now two investments rather than one, and those who continue to treat American exposure as a single asset are falling behind the market's evolving view.
Written by urgent.news from Arabian Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
