🇺🇸 America hogged investors' attention

What’s going on here?

The International Monetary Fund (IMF) revealed that the US has been receiving more of the world’s investment now than before.

What does this mean?

Only 18% of global investors’ cash was being funneled into the US before the pandemic. Now, that figure is closer to a third. The change happened despite the freezing of Russian assets at the start of the war in 2022, which put folk off the idea of moving money around. And with America hogging the attention, there’s less to spread elsewhere. That matters: emerging markets need money from foreign investors to develop themselves. And recently, they’ve seen more money leave than arrive for the first time since 2000. Case in point: China used to get about 7% of the world’s investment, but that chunk is now down to just 3%.

Why should I care?

Zooming out: America is changing.

Higher interest rates in the US mean overseas investors can make decent returns from low-risk assets like government bonds. Plus, the country’s trillion-dollar incentives for its renewable energy and semiconductor industries are attracting opportunistic investors. But that could change on a dime. For one, the looming presidential election could overturn those policies. And for another, the Federal Reserve is hinting at lowering interest rates later this year, which could make certain US assets look less appealing to global investors.

The bigger picture: China’s out in the cold.

China is trying to woo back foreign investors. Yet, even though the country’s stock market has picked itself up from its January lows, Chinese stocks have still been snubbed by several new funds. Fifteen emerging market-focused funds have launched this year – and none of them included China, which underscores ongoing worries about the country’s policies and geopolitical risks. Mind you, that could be a jackpot for countries like India, Mexico, and Vietnam: they’ll be prime targets for foreign investment, especially if interest in the US wanes.

What’s going on here?

Paris lost its title as Europe’s biggest stock market to London, after political turmoil tripped up France.

What does this mean?

There’s a snap election on the cards in France, with the first round taking place on June 30th and the second on July 7th. Already, the announcement has brought about significant market instability. The crucial worry is that new government policies and spending plans could put public finances at risk. And at times like these, traders tend to exit their positions first and ask questions later. The fallout hit the euro, French bonds, and the stock market. That essentially wiped out all of France’s recent stock uptick, making it the worst-performing market in the eurozone this year.

Why should I care?

Zooming in: Sacrebleu.

France’s economic outlook had been fine before news broke of the election. In fact, French banks were some of Europe’s best-performing stocks, trading cheaply, paying big dividends, and pulling off share buybacks. But while some traders like the prospect of high-risk, high-reward situations, more risk-averse investors tend to run for the exit. Case in point: Société Générale’s share price fell over 10% after the announcement. Government debt shows up on the French bank's balance sheet, so investors were eager to distance themselves from the risk of that debt piling up.

The bigger picture: Global conundrum.

Election results have already rocked stock markets in Mexico and India this year. And the US is on edge, too, with its election slated for November. Bear in mind, though, that elections can be uneventful. The UK’s next one takes place in July, but the outcome is thought to be predictable and unlikely to create too much instability, as the expected winner's policies are well-known and understood.