“Sell American” has been cited as a reason for the market turmoil in the past few weeks as Trump’s policies have heightened uncertainty.
But JPMorgan said foreign investors have not been aggressively selling U.S. assets.
Instead, the bank sees hedge fund selling as the main driver of downward pressure on stocks.
JPMorgan said the “sell American” argument that has seen sharp swings in U.S. assets in recent weeks may be exaggerated.
There has been widespread speculation that foreign investors are selling U.S. stocks, bonds and the dollar amid heightened policy uncertainty. The speculation was particularly strong in early April, when President Donald Trump’s sweeping tariffs hurt confidence not only in stocks but also in safe-haven assets such as U.S. Treasuries.
However, JPMorgan said Thursday that recent data does not fully support that argument.
“To date, there is little evidence of significant foreign selling of U.S. stocks or bonds,” JPMorgan analysts wrote in a note Wednesday.
While the S&P 500 has corrected sharply since its Feb. 19 record high, its 20% peak-to-trough drop can’t be entirely attributed to foreign outflows. In fact, a look at U.S. stock ETFs traded offshore shows that net buying has continued during this period.
Instead, the bank wrote that it believes hedge funds are the main culprits behind the sharp sell-off in stocks.
“We believe much of the year-to-date sell-off in U.S. equities has been driven by equity-focused hedge funds, such as equity long-short funds, both quantitative and discretionary, the analysts wrote. We estimate these investors have sold about $750 billion of equities so far this year,” the analysts wrote. “The selling impulse by hedge funds is also consistent with the large negative impulse we have found in U.S. equity futures so far this year, particularly the S&P 500 and Nasdaq 100 futures contracts.” Some also pointed to the sharp bond market sell-off in April as a clearer sign that foreign investors are abandoning the U.S. Treasury yields surged earlier this month as Trump rolled out his tariffs. But so far, data shows “little selling” in non-registered U.S. bond ETFs, JPMorgan wrote. The Institute of International Finance is similarly unconvinced. “There are no signs of major foreign selling, based on weekly custodial holdings data from the Federal Reserve Bank of New York (as of April 9). In fact, the share of U.S. Treasuries held by foreign investors has been gradually declining since its peak in 2015,” the Institute of International Finance wrote in mid-April.
“On the other hand, recent 10-year and 30-year bond auctions (held on April 9 and April 11, respectively) suggest strong overall demand.”
Earlier this year, market commentators said that U.S. market exceptionalism was over, making European and Asian stocks more attractive to international buyers. While U.S. stocks have been the obvious choice in recent years, stretched valuations make them harder to sell in 2025.
However, JPMorgan said that this is not a reason to bet on a retreat in foreign stocks either. Historically, periods of sustained underperformance by U.S. stocks have not sparked major international sell-offs.
