Fortunately we can easily get into oversold bonds and invest in high-quality US companies that are now well set up to attract foreign capital.
Immediately after President-Elect Donald Trump won his second term last week, the US dollar surged, while US Treasuries fell.
Both moves are opposite sides of the same coin: Investors believe Trump’s policies will be inflationary. The theory suggests this would happen for a couple of reasons:
Now let me explain why both of these theories are incorrect. (And let me be clear we always take a non-political, data-driven approach here at Contrarian Outlook).
Further on, we’ll look at a group of high-income closed-end funds (CEFs) that are set to profit, including a specific one to put on your buy list: It yields a rich 11% today.
The best way to dive in here is to look at how the trend of foreign investment in America affected bond rates and the dollar long before Trump became president the first time.America Is a Capital Magnet
Whether the red or blue party is in power, America attracts a lot of money from abroad for a simple reason: It’s a great place to do business.
As the head of Norway’s $1.6-trillion sovereign wealth fund recently said, “Americans just work harder” and have a higher “general level of ambition,” which is why a lot of Europeans love investing in America.
This has been going on for a long time, which is why foreign direct investment in the US has risen strongly since 2000, when the divergence between European and American growth grew especially wide.
More investment in the US has helped America’s stock markets grow to become 60% of the planet’s stocks by market cap—even as the US accounts for just 20% of global economic activity.
This, of course, is a big reason why our CEF Insider portfolio is heavily skewed toward American companies.
