Chelsey Dulaney
Appearances
The Journal.
Taking Stock of the ‘Sell America’ Trade
by America became a trade that was embraced all over the world. That's been the trade for basically over a decade. So everybody was sort of pouring in to these U.S. bets.
The Journal.
Taking Stock of the ‘Sell America’ Trade
Investors have just been pouring in from abroad to American stocks. They've been buying American bonds. Part of that is the fact that the dollar, the US dollar, is the world's reserve currency. It means that central banks around the world, they want to hold dollars.
The Journal.
Taking Stock of the ‘Sell America’ Trade
Coming out of the 2008 financial crisis, the U.S. economy recovered a lot faster than the rest of the world. Europe has been stuck in this stagnation. Japan has been battling deflation. China has been really struggling for several years now. And so the U.S. economy was just growing much faster than anybody else's.
The Journal.
Taking Stock of the ‘Sell America’ Trade
America has this very fast-growing tech industry. It's been the leader in a lot of sort of high-growing industries. And so that's attracted all sorts of investors.
The Journal.
Taking Stock of the ‘Sell America’ Trade
So foreigners own now about almost $19 trillion worth of U.S. equities. And if you were to go back to 2011, that's only $4 trillion.
The Journal.
Taking Stock of the ‘Sell America’ Trade
The upshot of American exceptionalism for the U.S. is that it's led to a lot of money coming into America. And for the U.S. government, that means that it's been cheaper to borrow money. And the U.S. has an ever-growing budget and trade deficit. So that has helped fill that gap, this demand for American assets. The demand from abroad for American stocks has been a huge reason why, you know, U.S.
The Journal.
Taking Stock of the ‘Sell America’ Trade
markets have grown as fast as they have and why U.S. stocks have a much higher valuation than the rest of the world.
The Journal.
Taking Stock of the ‘Sell America’ Trade
We saw the American exceptionalism trade turbocharged. People called it the Trump trade. People thought that Trump was going to cut taxes. He was going to deregulate and the American economy was going to do even better. And so there was this big rally in stocks. The dollar went up.
The Journal.
Taking Stock of the ‘Sell America’ Trade
It became clearer and clearer to investors that he might mean it this time, that he might actually do it, he might impose these really steep tariffs on global trading partners. And that led to a lot of volatility in the first quarter of the year. And then we had Liberation Day.
The Journal.
Taking Stock of the ‘Sell America’ Trade
The tariffs that they introduced were much, much deeper than investors had expected. And that's when you start to really see the sell-off take hold. The announcement could affect trillions of dollars of U.S. imports. That's when we start to see markets getting a little funky.
The Journal.
Taking Stock of the ‘Sell America’ Trade
It's very unusual. Yeah, it's definitely unusual. So typically, when you see stocks selling off, you would see treasuries and the dollar rising. And then after Liberation Day, we didn't see that. We started to see all three of these things selling at once. And that was really a sign that investors were losing confidence in American assets and American policies.
The Journal.
Taking Stock of the ‘Sell America’ Trade
The Trump administration has downplayed how serious this is. And I think Trump himself has said, like, this can be painful, but, you know, in the end, it'll be worth it.
The Journal.
Taking Stock of the ‘Sell America’ Trade
For investors, global investors, U.S. investors, threatening to fire the Fed chair is, I think, a bit of a red line. The pressure that Trump has been putting on Jerome Pelt has definitely added another layer to investors' anxiety about the fact that, you know, we're potentially dealing with a less predictable America.
The Journal.
Taking Stock of the ‘Sell America’ Trade
He was talking in a kind of low-key way, as Powell is known to do, about the economic outlook.
The Journal.
Taking Stock of the ‘Sell America’ Trade
And one of the things he said was that there is a strong likelihood that consumers are going to face higher prices. And that seemed to really set Trump off.
The Journal.
Taking Stock of the ‘Sell America’ Trade
He calls him a major loser. He's been calling him Mr. Too Late, as in too late to cut interest rates.
The Journal.
Taking Stock of the ‘Sell America’ Trade
Powell is likely very worried about inflation and the fact that higher prices on U.S. imports could drive up inflation. As a central banker, that likely means you would need to hold interest rates higher. Trump, on the other hand, wants interest rates to be lower because that could help boost the economy.
The Journal.
Taking Stock of the ‘Sell America’ Trade
For investors, even just mentioning it, even just talking about this is something that just reinforces this idea that we're in a new era. We're in a new world where, you know, the U.S. is not playing by the same rules.
The Journal.
Taking Stock of the ‘Sell America’ Trade
It's, I mean, the Trump administration, both through the tariff policy and through these threats to fire Powell, it's shown that it's willing to break with these norms of these conventions. Yeah. Yeah, these longstanding conventions that have been one of the reasons why people want to invest in the U.S. So I think he's, yeah, all of these attacks have really shaken investors.
The Journal.
Taking Stock of the ‘Sell America’ Trade
Overall, investors are happy to see the administration walking back some of the more dramatic threats. The Trump administration's willingness to pivot is something that they want to see. But confidence is certainly still going to be shaken. And investors are still going to be very wary about what comes next in this rollercoaster situation.
The Journal.
Taking Stock of the ‘Sell America’ Trade
There's definitely a seed that has been sown, and it probably will take a longer period of time to rebuild confidence once it's been shaken. I think we probably will see some stabilization in the market, but investors are making long-term plans to sell America. And a lot of investors were really concerned that their investments had become so concentrated in the U.S.,
The Journal.
Taking Stock of the ‘Sell America’ Trade
But the performance had been so good. And so you couldn't really stop because you would be underperforming and it would be bad for your clients or your pensioners. And nobody wants to underperform. So even before this, people were worried about being so concentrated in the U.S. And this has just shown people why you don't want to do that. And so I don't think it's a flash in the pan.
The Journal.
Taking Stock of the ‘Sell America’ Trade
I think it has started a broader conversation around especially among foreign investors who don't have to invest in the U.S. They have a lot of other options. So I think it has started a conversation about investing more elsewhere.
WSJ What’s News
Bonds Sell Off as New U.S. Tariffs Upend Global Trade
The U.S. treasury market has been the safe haven market for the entire world for a very long time. That's being tested right now. So there is some indication that foreign investors are potentially selling treasuries, taking that money back home, investing them in their home markets.
WSJ What’s News
Bonds Sell Off as New U.S. Tariffs Upend Global Trade
There's also concern about the unwinding of some leveraged hedge fund bets on treasuries, which regulators have been warning about this for quite a long time. There's just a lot of uncertainty around the U.S. economy right now and how the Federal Reserve is going to respond to that. So what we're seeing basically is investors becoming a lot more skeptical of U.S. assets across the board.
WSJ What’s News
Bonds Sell Off as New U.S. Tariffs Upend Global Trade
That includes treasuries, that includes stocks, that includes the dollar.