Any Henwoodians out there with data on the importance of foreign money in the US stock market today? It seems that relatively low US interest rates and inflation are the result of a strong dollar and an important cause of the growth of stock mkt prices hence US GDP growth. And that US GDP growth, with a strong dollar, increases balance of payments on current account deficit. Foreign money inflows seem to keep the dollar relatively strong. But given that the "flight to quality" has subsided, i.e., that risk premiums around the world tend to be converging, why would foreigners (or US money abroad) come to the US in such quantities given relatively low interst rates? Because the foreign money is going into the stock market, which keeps the market up and stimulates higher levels of both consumption and investment in the US?
If so, then it seems that foreigners are financing the unexpected expansion of US GDP via keeping the stock mkt strong. Does anyone have any relevant data on the proportion of foreign money in the US stock market? From Europe, especially, when stock prices are flat (unlike everywhere else where stock prices are rising fast)?
Or is just a question of the US agreeing with Japan that the dollar should be strong relative to the yen, because a strong yen would be bad for Japan's recovery and a weak dollar would be bad for US GDP growth rate? If so, then we would see some action in both countries supporting the dollar, right? Or wrong?
Thanks for any help, Jim O'Connor