It made front page news of every media outlet in the country in 2011. The USA has lost it's AAA credit rating! When the S&P downgraded US issued debt; rumors and predictions of our country’s financial demise ran rapid. “China owns all of our debt and therefore owns us” and “we are printing dollars so fast they will soon be worthless” were statements I both read and heard.
Since 2011, what has happened is the exact opposite. Foreign ownership of US debt has actually been declining for a decade now (see link below courtesy of JP Morgan). To be fair, at 12%, China is the country that owns the most US debt. The US dollar has become stronger, not weaker relative to other country’s currencies which actually has created a headwind for US exporters. When our dollar gets stronger it makes our goods more expensive for foreign buyers.
Speaking of currencies, China is letting the renminbi (their dollar) plunge as a counteroffensive maneuver to combat U.S. tariffs. This has the market concerned and in the middle of a sell-off just after hitting another all-time high mark last Monday, July 29th. This sell off comes despite most publicly traded corporations reporting 2nd quarter earnings that meet expectations. Bottom line, in large part, corporations have more earnings than ever before, but there is concern if that will stay true for very long.
As always we hope you find the Weekly Market Review both informative and interesting. Have a great week.
Trevor N. Coe, CFP®