Deutsche Bank has reported a sharp decline in foreign investment in U.S. assets over the past few weeks, mainly due to rising uncertainty from President Trump’s new tariffs. According to George Saravelos, Head of FX Research at Deutsche Bank, recent data on U.S. capital inflows is concerning. The bank’s analysis shows that foreign investors have almost stopped investing in U.S. bonds and stocks in the last two months, which could create pressure on the U.S. dollar, given America’s rising budget and trade deficits.
To monitor foreign investment, Deutsche Bank tracked about 400 large Exchange-Traded Funds (ETFs) based outside the U.S., mainly in Europe, that invest in American stocks and bonds. These ETFs showed that foreign investors have been consistently selling U.S. assets. The selling of stocks peaked during the week tariffs were announced, and bond selling, which started earlier in March, has also continued. Even though U.S. stock prices recovered last week, foreign investors have not returned.
In addition to ETFs, Deutsche Bank also used data from EPFR, a firm that tracks fund flows in both passive and active funds. This data confirmed the trend: there has been a sharp halt in foreign buying of U.S. stocks and an even stronger selling of bonds. Since EPFR covers a broader and slower-moving group of investors, it showed the same overall story with slight differences.
Overall, Deutsche Bank’s research highlights a serious slowdown in foreign interest in U.S. markets. This trend could pose a risk to the strength of the U.S. dollar, especially if the twin deficits continue to grow without strong foreign investment support.
