New analysis from Yardeni Research reveals that foreign investors have been buying US stocks at a record pace, raising concerns among some analysts.
Historically, heavy buying by foreign investors has preceded major market crashes, such as the 1987 crash, the dot-com bubble in 2000, and the 2008 financial crisis.
And why does this trend occur in the stock market?
Very simply, many foreign investors are attracted to the US market due to the dominance of leading companies such as Apple, Nvidia and Tesla. In South Korea, for example, U.S. stock holdings rose 65% last year, as investors look for better returns outside their home market. This trend is repeated in other countries, such as the United Kingdom, where retail investors are withdrawing funds from domestic stocks to invest in the US market. The flock of investors from outside the US is in the heat of the great returns of the technology market.
The president of Yardeni Research warns that foreign purchases could be a «contrary indicator»signaling a possible market correction. Despite this, US stocks are expected to perform well in the market, especially those that do not have that overvaluation on the stock market.
And investors must separate between good stocks on the stock market at a good price and stocks that are very good on the stock market, but excessively expensive for investors.