There has been a shift in global capital since the pandemic, with the U.S. emerging as the leading destination for foreign investment. In today’s FA Alpha Daily, we explore the driving forces behind this shift and the ongoing trends that continue to bolster investment attraction towards the U.S. dollar.
FA Alpha Daily:
Monday Macro
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According to the International Monetary Fund (“IMF”), one-third of the world’s capital has flowed into the U.S. since the pandemic…
Pre-pandemic, that number was just 18%.
In other words, the U.S. is growing its position as the leading destination for foreign investments.
And more foreign investment and capital inflows translate into more trust in the U.S. economy and its currency.
On the other hand, the U.S.’s biggest competitor is suffering from a lack of investment…
Over the same period, China’s share of global capital inflows fell from 7% to 3%.
One of the drivers behind the increase in capital flowing to the U.S.—and away from China—is interest rates.
U.S. interest rates are at their highest level in the past two decades. China, on the other hand, has been actively lowering its interest rates to revive the country’s economy.
Its one-year loan prime rate—the benchmark for corporate and consumer loans—is just 3.45%… down from above 4% pre-pandemic.
The U.S. government is still considered one of the safest investments in the world, so if investors can get a higher yield from a safer investment, that’s what they’re going to do.
Not to mention, investors know that U.S. corporations are still among the best in the world…
We can see this by looking at U.S. companies in aggregate versus Chinese companies.
Rather than looking at an individual company’s Uniform return on assets (“ROA”) like we normally do, we can combine the assets and returns of all public companies in a country to get a sense of how profitable the overall economy is.
Since 2009, aggregate Uniform ROA for U.S. companies has been higher than China’s companies.
Take a look…
The U.S. has been more profitable than China for 15 straight years… and it’s not slowing down anytime soon.
It has had some of its most profitable years ever since 2021—and it’s easy to see why…
For starters, the U.S. leads the world in oil and gas production. And more and more countries are relying on our energy industry as geopolitical tensions ramp up.
In addition to America’s energy dominance, it also heavily invests in its supply-chain infrastructure. U.S. companies are bringing their supply chains closer to home—in what we call the “supply-chain supercycle”—and it’s creating countless investment opportunities in the space.
Moreover, the U.S. is the world’s front-runner in artificial intelligence (“AI”) investments. In 2023, U.S. private investment in AI was nearly $68 billion… more than double that of the rest of the world’s investments combined.
AI in particular is a way for the American economy to stay on top… especially with companies like U.S. chip giant Nvidia (NVDA), which became the largest company on Earth last month.
Plus, the U.S. is still investing in AI. We’re spending billions of dollars on semiconductor plants… more data centers… and everything else that will continue to drive the AI boom.
All of this should bring even more investment to the U.S. dollar… not less.
EVENT ALERT:
AI has ushered in the biggest tech mania since the 1990s and has created 500,000 new millionaires—roughly 587 per day—since the launch of ChatGPT in late 2022.
In fact, Nvidia is already up more than 783% in the past two years and just last week, the S&P 500 made a new all-time high, driven mostly by AI stocks.
While this may sound like good news, the world elite are already preparing for an AI crisis that could trigger a major catastrophe in the stock market.
When this crisis happens, it could impact your money—whether you own AI stocks or not.
If you want to protect yourself from this impending crisis, it is crucial that you join Professor Joel Litman on Thursday, July 18, at 1:00 p.m. Eastern time in an urgent AI stock summit.During this AI Panic Summit, Professor Litman will tell you everything you need to know about the impending turmoil on AI stocks and what you can do to avoid massive losses and seize huge gains.
Register now through this link to secure your spot at the summit. This event is completely free of charge, all you need to do is confirm your attendance.
See you there!
Best regards,
Joel Litman & Rob Spivey
Chief Investment Strategist &
Director of Research
at Valens Research
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