Risk Rising of a Foreign Pullback from the S&P 500

Apollo Chief Economist

There have been significant inflows from abroad into US equity markets, see the first chart below, and foreign investors are now significantly overweight US equities, see the second chart below. Combined with the dollar’s decline and the ongoing overvaluation of the Magnificent 7, see the third chart, the downside risks to the S&P 500 as a result of foreigners selling are significant.

Significant rise in foreign holdings of US equities
Sources: US Treasury, Haver Analytics, Apollo Chief Economist
Foreigners hold a significant amount of US stocks and fixed income, and the composition of their holdings has changed dramatically since the financial crisis
Note: Figures may not sum to 100% due to rounding. Sources: Federal Reserve Board, Haver Analytics, Apollo Chief Economist
Top 10 S&P 500 Companies P/E Ratios
Note: The Magnificent 7 consists of Alphabet, Amazon, Apple, Meta Platforms, Microsoft, NVIDIA, and Tesla. Sources: Bloomberg, Apollo Chief Economist

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