Forward Guidance Tariffs Are Reversing U.S Dollar Capital Flows | Bob Elliott
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Apr 30, 2025 Bob Elliott, from Unlimited Funds, dives into the reversal of U.S. Dollar capital flows following Trump's tariffs. He discusses the U.S. balance of payments problem and the growing skepticism among global investors. Elliott sheds light on trade policy impacts on economic growth and investment strategies, emphasizing foreign investor behaviors. He also highlights the necessity of diversifying portfolios beyond U.S. assets in this shifting economic landscape.
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Origins of US Twin Deficits
- The US has run large twin deficits over decades fueled by foreign capital inflows.
- First driven by Asian reserve accumulation, later by bets on US exceptionalism post-GFC.
Capital Inflows Create Market Turns
- Extreme capital inflows to the US have started to moderate, causing asset price drops.
- Markets correct when capital flows shift from extreme levels, not necessarily to zero.
US Growth, Not Just Reserve Currency
- US capital inflows post-GFC came from strong US economic growth, not just reserve currency status.
- Capital flows reflect fundamentals and growth prospects, not just dollar dominance.