Global funds are heavily invested in the United States. What is the feasibility of "selling the United States" transactions?

The discussion surrounding "selling America" has recently heated up again. Despite the news of an agreement reached by the US President Trump on the Greenland issue causing the market sentiment to temporarily calm down, analysts generally believe that this trading topic will not disappear. Looking back at last year, the market once discussed "de-dollarization," worrying that Trump's trade policy centered around tariffs might lead to a significant reduction in global investors' allocation to US assets. However, the reality did not evolve as some concerns. According to US Treasury Department data, in the first 11 months of last year, foreign investors net bought US securities worth as much as 1.27 trillion dollars, with a large portion of the funds flowing into Wall Street driven by the artificial intelligence boom. However, since then, the situation has clearly changed. A series of controversial policies introduced by Trump since taking office have been viewed by the market as shaking the political and economic order that has been built over the past few decades across the Atlantic, reigniting discussions about shorting US assets. From a stock perspective, global investors do hold a vast amount of US assets. The latest official statistics show that foreign investors hold about 68.9 trillion dollars in US assets, while the US holds about 41.3 trillion dollars in foreign assets, leaving a difference of about 27.6 trillion dollars. This difference represents the US's net international investment position, which has reached a historical record high whether measured by nominal scale or as a percentage of GDP (over 90%). In the context of trading, this means that the world is in a "net long" position on the US. Such a highly concentrated allocation, especially in equities, is increasingly seen by more and more investors as the "Sword of Damocles" hanging over the US markets. Against the backdrop of Trump's tough policies causing unease in several European countries, the market has begun to reassess whether global investors are willing to maintain this highly concentrated position or gradually adjust their allocation. Prudent adjustment rather than a collective exit In the short term, the possibility of a massive withdrawal of US assets is still considered low. Some Nordic pension funds have signaled adjustments, but the impact is limited. US Treasury Secretary Janet Yellen stated this week that these institutions are relatively small in scale and would find it difficult to have a substantial impact on the overall market. However, this discussion has also brought back the concept of "financial mutually assured destruction" into view. Unlike previous assumptions, this term is now more commonly used to describe potential financial games between Europe and the United States. Past experiences show that even if foreign investors gradually adjust their holdings of US bonds, it may not necessarily cause significant market turmoil. The ebb and flow of demand often helps to offset the pressure of divestment from a single region. George Saravelos, a strategist at Deutsche Bank, estimates that European countries collectively hold around 8 trillion dollars in US stocks and bonds, nearly double the total of other regions. Although trust in US policy in some European countries has decreased, rebuilding trade relations, supply chains, and strategic partnerships takes time, making a rapid "de-Americanization" both difficult and highly risky. As Sarah Bauerle Danzman, Senior Research Fellow at the Atlantic Council, stated, reshaping the global economic order will inevitably come with significant wealth losses, which is why all parties are well aware of the risks involved and continue to exercise restraint. Risk of capital inflows slowing down Analysts point out that the real risk may not necessarily come from a massive outflow of funds but rather from the potential slowdown of overseas capital inflows, which could depress the prices of US assets and gradually erode the market narrative of the "American exceptionalism." The US still faces a significant current account deficit that requires continuous inflows of overseas capital to offset. While the deficit has narrowed in the past two quarters, protectionist trade policies may further improve this situation in the short term, but still require annual net capital inflows of over 1 trillion dollars. Data shows that in the first 11 months of last year, foreign investors net bought US securities worth 1.27 trillion dollars, with stock investments reaching 663 billion dollars, significantly higher than previous levels. Brad Setser, Senior Research Fellow at the Council on Foreign Relations, pointed out, "The global allocation to US assets is already very concentrated, the key is not to persuade investors to keep holding them, but whether they can attract them to buy more." Resilience in European capital flows In terms of specific flows, European capital remains a significant support for US Treasury bonds. According to portfolio data tracked by Citigroup, from April to November last year, Europe accounted for about 80% of foreign purchases of US Treasury bonds. After Trump announced a massive "liberation day" tariff policy in April, Europe contributed the vast majority of the increment in foreign-held US Treasury bonds, with the size of foreign-held US Treasury bonds reaching a historic high in November. Of course, there are signs of localized adjustments as well. This week, Sweden's pension fund Alecta stated that it had sold off most of its US Treasury bond holdings in the past year, while Denmark's AkademikerPension plans to liquidate its holdings by the end of this month. However, with Trump recently easing some of his tough stances and the stabilization of financial market sentiment, analysts believe that what is more likely to happen now is a gradual rebalancing rather than a radical "selling of America." Citigroup analysts stated in a report that although the narrative of "selling America" will continue to resurface, as of now, there is no clear sign of European investors massively selling off US assets.