Overseas Buyers Scoop Up U.S. Shares (Bullish or Bearish)?
“No crowd buys stocks of other countries intelligently”
by Bob Stokes
Updated: March 22, 2023
The fact that investors from other countries are feverishly buying U.S. stocks might seem like a bullish sign.
On the other hand, consider what Robert Prechter said in his book, Prechter's Perspective:
No crowd buys stocks of other countries intelligently. For decades, heavy foreign buying in the U.S. stock market has served as an excellent indicator of major tops.
Some of the heaviest foreign buying -- whether it's in the U.S. or another country -- tends to occur when a trend is near or at an end.
Looking at an example: In the late 1980s, after years on the sidelines, foreigners became net buyers of Japanese stocks. This coincided with the ending phase of one of the biggest bull markets in history.
Returning to the U.S. but sticking with roughly that same period of history, here's what our Sept. 2000 Global Market Perspective had to say as it showed this chart:
This chart of the Dow and foreigners' net purchases of U.S. equities illustrates how beautifully the pattern has held through the U.S. bull market of the 1990s. The solid lines show the flood of foreign buyers within a month of each high, and the dotted lines show them rushing back out again on the months of the big lows. Early in the decade, when stocks were a bargain, foreigners were net sellers. They did not sustain net purchases until the Dow crossed 8000 in 1997.
By the way, overseas buyers also zealously bought U.S. shares right before the 2007 top.
As a quick reminder, the reason for mentioning all of this is what I said at the outset about feverish overseas buying of U.S. shares presently. Here are more details via this chart and commentary from our March Global Market Perspective:
Foreigners are surging back into U.S. equities. At $42.9 billion in November, the latest reading of foreign purchases is higher than both the 2000 and 2007 buying extremes. It is shy of the December 2020 record of $78.6 billion, but if foreigners flocked to U.S. stocks the way retail investors did in January, we may find that when the latest readings are released, foreign purchases will be at a new record.
One way to utilize the foreign buying (or, selling) indicator is with the Elliott wave model.
Learn what Elliott wave analysis reveals about what's likely next for major global stock indexes, including in the U.S., by following the link below.
Chances Are – You’ll Love Our Global Market Perspective …
...That is – if you're an informed investor who wants to know what's going on with major financial markets – near and far.
Interested in stocks? GMP has you covered.
Interested in cryptocurrencies (including Bitcoin and Ethereum)? GMP has analysis and forecasts for you.
Interested in energy (crude oil and natural gas)? Yep – also covered.
Interested in metals, bonds, forex and world economies? You guessed it – covered in detail.
The three regions that GMP covers the most extensively are the U.S., Europe and the Asian-Pacific.
The beauty of our Global Market Perspective is the wide-ranging coverage of 50-plus financial markets – in one convenient publication.
Chances are – you'll love it.
Check it out by following the link below.
Lockheed's (LMT) "Waterfall Decline" from Record Highs Fits Elliott Wave "Form" to a T
On April 18, aerospace/military defense giant and Big Board listee Lockheed Martin (LMT) soared to its highest level in its 28-year history. Where "fundamental" analysis was shapeless, Elliott wave analysis saw the stock's current form, and its price future.
Forget the Fed -- Watch the Waves
The Federal Reserve, and to a lesser degree the European Central Bank, have dominated the conversation about interest rates lately. But watch our Interest Rates Pro Service analyst Ivo Zhelev apply textbook Elliott waves to forecast the price of the UK's Long Gilt -- and, by extension, UK interest rates -- without a single glance at central bank statements.
Why a U.S. Recession May Foil Economists’ Expectations
A recent survey reveals positive expectations for the economy by a group of "professional forecasters." Learn why you may not want to bet the farm on that expectation. This chart compares leading economic indicators around the time of past recessions with what's going on now.