“In the first half of this year, global investors seemed to reassess their global allocations in light of surging economic policy uncertainty in the US. Stock markets in the US underperformed their European counterparts, and the US dollar weakened substantially versus the euro. Market participants suspected a degree of capital flight from the US. However, a closer look at financial accounts does not reveal a significant redirection of capital from the US towards Europe so far. True, there has been a slowdown in outflows to the US across direct investment, portfolio investment and other investment (mainly consisting of bank lending). But its scale was not unusual in a longer-term comparison and may not have been the prime reason for the divergence in asset prices.”
Morten W. Langer
