00:00 Julie
International equities have outperformed US stocks year to date, but analysts are suggesting that trend could shift going forward. As we head into the fourth quarter here with more on whether the sell America trade could become the buy America trade is Yahoo Finance's own Allie Canal. Hi, Allie.
00:15 Allie Canal
Hi, Julie. And yes, earlier this year, talk of a sell America trade spread across Wall Street. We saw US stocks, Treasuries and even the dollar all tumbling at once. That's an unusual move that shook confidence in America's safe haven status, but just a few months later, that story has now flipped.
00:36 Allie Canal
Foreign investors are sticking with US stocks. The dollar, although still weaker, has stabilized and Team USA seems to be back on top. That's all thanks to fading tariff fears, easier Fed policy and a still strong US economy. Strategists tell Yahoo finance the swings show how quickly sentiment can turn. For example, panic over tariffs
00:56 Allie Canal
faded as companies managed the impact better than feared. That was aided by carve outs, cost absorption and rerouting shipments through lower tariff countries. According to City, the effective US tariff rate is now closer to 9%.
01:13 Allie Canal
That's about half of the 18% theoretical rate, showing just how much those carve outs and workarounds have helped blunt the blow. Meanwhile, the Fed's pivot to easing, lower interest rates, a renewed confidence in US growth. That's all helped restore investor optimism. Here's a little bit more of what strategists told us this week.
01:32 Speaker A
it went too far. That is one area where we think that that Delta between US and International just kind of was too large. At its peak, the difference between the two was about 17%, meaning that international stocks were outperforming US stocks by 17%.
01:52 Speaker A
So, we took the bet that that was going to collapse. and that trade has been working out. International structure is still performing on an absolute basis. But since April, you've seen that collapse to about 10% the difference between the two. So, we think that's probably going to continue.
02:07 Speaker B
But overall, I think our main thesis is is global diversification is really key. You know, we can see that the US is doing well. We continue to believe the risk assets will continue to perform fairly well over the next 12 months. So, you want to have some some exposure to both domestic, some to international.
02:27 Allie Canal
And according to Ned Davis research, foreign investors now allocate roughly 30% of their US assets to equities. That's near record highs and well above the long-term average of around 19%. That suggests that global investors are holding firm in US markets, not heading for the exits. I did have the chance to also speak with
02:44 Allie Canal
Truist chief market strategist Keith Learner about this. He told me it all comes down to earnings and tech dominance as well. International profits have lagged. Foreign markets simply don't have the same exposure to innovation, especially in artificial intelligence. And we've seen how much that's driven a lot of this US growth.
03:08 Allie Canal
So even though there is a case for holding international equities as a defensive hedge, Wall Street's spring panic looks more like a blip rather than a lasting trend here, Julie.
03:19 Julie
Thanks, Allie. Appreciate it.
