One chart shows an under-the-radar reason Trump's trade war could hurt US stocks
Apollo flagged a less-talked-about reason the trade war could impact the US stock market.
The firm's top economist pointed to the record-high foreign ownership in US stocks.
A lower US trade deficit means fewer dollars held overseas that could make their way back to US markets.
The trade war could be inflationary and create headwinds to growth, but there's another reason Donald Trump's tariffs could negatively impact US stocks.
Apollo Global Management's Torsten Slok pointed to the record-high ownership of US stocks among foreign investors, who own 18% of the total US equity market, according to the firm's analysis of Federal Reserve data.
Check out their chart below.
"This is the mirror image of a trade deficit. Foreigners selling goods to the US receive dollars in return, which are then used to purchase US assets, including US equities," Torsten Sløk, Apollo's chief economist, wrote in a note on Wednesday. "If the trade deficit is eliminated, there will be fewer dollars for foreigners to recycle into the S&P 500."
Foreign investors have already shown signs that they're beginning to sour on the US market amid the turmoil around tariffs.
Goldman Sachs estimated that foreign investors sold around $60 billion worth of US stocks from the start of March through late April.
Most global investors, meanwhile, see international stocks as beating US peers over the next five years, according to a fund manager survey conducted by Bank of America from June 6 to June 12.
In its June survey, 54% of investors said they believed international equities would be the best-performing asset, compared to just 23% who believed US equities would be the top performers.
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