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US stock market vulnerable to foreign investor flows
Description
In this podcast, Edmund Shing, Global Chief Investment Officer, discusses the risks to the American stock market from shifting foreign investor flows.
Foreign investors have significantly increased their holdings in US financial assets, totaling 10 trillion dollars between 2020 and 2024, with European investors holding 49% of these assets.
The S&P 500 is currently expensive at 20x forward PE compared with its long-term average of 16x, while the eurozone and Japan markets are fairly valued or cheap.
There is a “double whammy” risk for US equities as foreign investors may reduce exposure due to under-performance, high valuations and a weakening US dollar, potentially leading to further derating and currency losses.
We prefer US stock exposure via the S&P 500 equal-weighted index, along with rebalancing towards international stocks in the UK, eurozone, Japan, and possibly China.
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