Global investors who spent years recharging dollars and throwing S&P 500 and Nasdaq in shares now take big hits after President Donald Trump's recent trade war policy sent both shares and dollars tail.
For the crowd of London, Paris and Tokyo according to Monday to Bloomberg's report.
The old game book was simple. Buy dollars, buy shares for us, follow a profit. American stocks killed it compared to the domestic markets and the rising dollar was like free bonus points.
Now the S&P 500 decreases even worse through the eyes of strangers – a 14% loss when measured in euros or yen. Trump's White House's immediate chaos mixed with the confidence of global investors who once saw the US more secure bets.
Investors rush to ground as the dollar decreases the hammer portfolios
Even if Trump suddenly decided to turn back the trade war course, the last month has already opened up brutal risks, which is to contribute to everything in the US.
Many foreign investors are screaming to protect themselves by loading currency on hedges associated with their mass $ 18 trillion in American stocks – a loose that accounted for nearly 20% of all US equities at the end of last year.
Morgan Stanley and Bank of America see customers jumping desperately protected from a falling dollar. Alexandre Hezez, the investment manager of the Paris Group Richelieu, said that his financial resources are now maximized, acknowledging: “Everything is upside down.”
Hezez thought that the risk of risk was meaningless. The premise was simple: if US equities fall, the dollar panic drives higher, balancing the damage. But this logic was blown into pieces.
Today, foreign investors in US shares are only 23%, which is a long decline in 2020 levels of almost 50%, based on the state -of -the -art custody data. The Bank of America strategists warned that when investors rush back to pandemic risking habits, this could mean adding another $ 5 trillion to the covered contact.
Entrepreneurs who try to protect themselves usually throw dollars into the markets. But the costs are brutal. For investors in Switzerland Frank and Yen, the cost of three-month risking is about 4% per annum. Euro -based investors pay more than 2%.
The risk cancel the dollar decreases, but it also wipes the benefit when the dollar collides back and the rolling costs are deeply reduced. Options also exploded. Euro-Dollar contracts are on its way to new records, but additional volatility has been 15% more expensive for Euro investors since the beginning of the year.
Some just give up guessing. Ticket prices in Prevoir Asset Management said Hendi said that trying to predict that dollar moves are not worth it. His fund, which had broken it when US equities fly, has fallen 18% this year. “Currency changes are something we just can't predict,” Hendi said of Paris. “Trump doesn't know, Powell doesn't know, no one knows how it will be clear.”
Others also warn panic. The US still owns the deepest markets in the world and some of its largest money producers, whose alphabet posts nearly $ 80 billion in the first quarter. And while the dollar scratches the two-year-old, it still stands.
The real question is whether foreign investors are finally ready to withdraw money from the US. Allianz SE thinks it's not likely. They claim that so much money is just nowhere else. Allianz economists, including Ludovic Subran, wrote that $ 28 trillion in international stakes are sitting in the US markets.
Even tiny movements could take exchange rates and global prices. Subran said, “If even a fraction of these assets were left in the United States, it would cause even higher distortions of exchange rates and global asset prices.”
In the meantime, the feeling that US magic can fade. Deutsche Bank's George Saravelos said the US exceptionality has already “eroded” and predicted that by 2027, the euro could climb up to $ 1.30 – a number no one has seen for ten years.
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