The phrase “Sell America”, which was a popular headline earlier this year, has been making waves in the media. It appeared that global investors were finally turning away from US markets.
The term “Liberation Day tariffs” has been used since the 1980s. This time, however, President Trump’s “Liberation Day Tariffs” in April triggered the term. Investors become worried when stocks, bonds and the dollar all fall at once.
Commentators warned about capital flight and the end to America’s financial dominance. For a brief moment, the reaction seemed real. Just a few months later, the evidence shows that the trade was never a permanent change.
The United States has not lost any foreign money. In fact, the money has flooded back into the United States. Even as the US enters a second government shutdown, the markets are far more resilient than rhetoric suggests.
What does “Sell America’ really mean?
In the markets, this term is used to describe a large rotation out of US assets. It is usually used to describe foreign investors who are simultaneously reducing their exposure to Treasuries and the dollar as well as US equities.
If the US appears overvalued or unstable politically, then global money will move elsewhere, usually to Europe, Asia or emerging markets. Shorting US assets can also increase the risk.
This story has been told before. In the 1980s, it was the Plaza Accord. In the 2000s, it was the “twin deficit” discussion. After 2008, it was re-emerging whenever investors questioned US monetary and fiscal policy during the global economic crisis.
In practice, three factors are often combined. First, doubts over policy credibility. For example, Washington’s open discussion about tolerating the weakening of the dollar.
The second trigger is the valuation gap, which occurs when US stocks trade for higher multiples than their global peers.
Third, flow dynamics. Foreign investors own close to 30% of US Treasuries, and almost 18% of US Equities (data for 2024). When these flows start to change, the effects can be seen across asset classes.
The April shock that revived this phrase
The 2019 version of “Sell America’ began in April, after Trump announced aggressive tariffs. Instead of strengthening the dollar as is the usual reaction to tariffs the greenback fell.
Treasuries were heavily discounted, and the 30-year yield jumped above 5%. The S&P 500 fell while Asian and European stocks rallied. It looked for a few weeks like a coordinated withdrawal from US assets.
Strategists were surprised by the correlation. Safe havens, like Treasuries, and the dollar, that normally attract inflows when there is uncertainty, were dumped along with equities. Analysts called Treasuries “a tainted products.”
The narrative took off. After years of relying solely on foreign savings, US finally faced resistance.
Two other factors fueled the fear. The economic team of the administration questioned the commitment to a strong currency, which undermined investor confidence.
Moody’s also downgraded US debt, adding to the concern that Washington’s fiscal path was out of control.
Why the trade failed almost immediately
By May, the data showed that the selling was not lasting. Apollo economist Torsten Slok made the observation that yields increased during New York hours when US investors were active but fell outside US times when foreigners were purchasing.
This suggests that domestic accounts are reducing their Treasuries purchases while overseas buyers are taking the opposite side.
Treasury Department data confirms this. After net selling in the month of April, foreigners became net buyers both of US Treasuries as well as US equities during May and June.
US Treasuries remained in high demand in July, as foreign holdings reached a record-high in that month and were up 9% year-over-year.
By mid-year, the foreign allocations to US equity securities accounted for more than 30% of their total financial asset mix. This level is near records, and far above the long term average of around 19%. The supposed exit from US equity markets never materialized.
The tariff shock was not as bad as feared. Citi estimates that the effective tariff rate was closer to 9% than the headline 18% after exemptions, supply chain workarounds, margin absorption, and exemptions were taken into account.
By June, the major US indexes were up and making new highs.
The second reason is more fundamental. The foreign markets lack the same depth of technology stocks. US tech earnings continue dominating global equity performance and this is difficult to replace.
Even at stretched valuations the growth profile of US firms is stronger than most developed peers.
Why the shutdown does not represent a new trigger
The latest government shutdown has brought to the forefront new headlines about the dysfunction in America. History shows that shutdowns rarely affect market direction.
Ten episodes have occurred since 1981. In half of these episodes, the S&P 500 experienced a drop of more than 5%. But none of them triggered a market crash or recession. During the 35 day standoff of 2018, the S&P 500 gained more than 10%.
In baseline estimates, the economic drag is small. It is estimated to be between 0.1 and 0.2 percentage points per week of GDP growth. This lost activity usually returns when the government reopens.
The blackout of data is the bigger problem. Investors won’t get timely reports on inflation, jobless claims or payrolls if the standoff continues, making it difficult to assess the Fed’s next move. This uncertainty can increase volatility, but it doesn’t fundamentally alter the growth path.
This time, the political theater is more intense. The Trump administration has threatened mass firings in lieu of temporary furloughs. If implemented, this would increase unemployment and possibly impact consumption.
But the markets have taken it in stride so far. The three major indices only slightly dipped on Tuesday. None of them fell below half a percentage. This muted response suggests that investors do not see the shutdown as a major event.
Investors learn a sharper lesson
The real lesson of 2025 isn’t that global investors will leave America. The US continues to be a global anchor for capital.
April’s panic was the result of policy risks colliding with crowded positions. Investors quickly recovered their confidence after recalibrating the actual earnings impact, and comparing US opportunities to the rest of world.
This does not mean that the US is invulnerable. The factors that would lead to a real “Sell America’ episode still remain. These include fiscal policies that undermine confidence, a disorderly decline in the dollar, or a sustained growth gap.
These risks should not be ignored. But the April experience revealed that foreign investors continue to find Treasuries, and stocks, attractive. Higher yields attract buyers. Tech profits support equity allocations. The dollar remains as the default reserve currency.
Short-term, shutdowns, tariff wars, and political noise could cause markets to be unsteady. For now, the data shows that the “Sell America’ trade was just a headline and not a long-term trend.
Investors who reacted by selling US assets missed the rally to new highs. Those who listened to the noise were rewarded. This may be the true lesson. America is still loud, but it’s where the global money wants to be.
This post Why the Sell America trade is over and the government shutdown is just a noise may be modified based on new developments.
This site is for entertainment only. Click here to read more
