Foreigners own more than $20 trillion of US shares. Deutsche Bank warned Friday that an AI-led selloff could cut both those stocks and the dollar.
That would break a decade-old pattern. The dollar usually rises when stocks fall, making it a safe haven. Bitcoin and gold are priced in dollars, and both rallied in August on a weaker dollar and Fed rate bets.
Why Foreign Investors Could Lose Twice
George Saravelos, Deutsche Bank’s global head of FX research, set out the case in a client note, Bloomberg reported.
He said foreign buying of US stocks now funds the entire US current account deficit. That is the gap between what the US spends abroad and earns.
“We estimate that roughly 90% of the $20+ trillion value of US equities owned by foreigners is attributable to price appreciation rather than underlying buying.”
For years, foreigners skipped currency hedging because falling stocks usually lifted the dollar. Saravelos said that cushion flips when the shock starts in the US.
Investors rushing to hedge must then sell dollars.
That happened after Liberation Day, President Donald Trump’s April 2025 tariff announcement. The Bank for International Settlements (BIS) found that hedging by non-US investors fed the dollar’s slide.
Is the AI Dollar Already Breaking With Stocks?
Intel fell nearly 30% on a weak forecast, and Amazon slid with other tech names.
The S&P 500 was down 1.28% by mid-afternoon UTC, TradingView data showed. However, the US Dollar Index, which tracks the dollar against six major currencies, edged up 0.09%. Gold dropped 2.44%, and Bitcoin traded lower.
Both rank among 2026’s worst major assets, despite gold’s best month since 1999 in August. Deutsche Bank’s reported comments did not address either asset.
Saravelos named the signal to watch. That is falling US real yields, or bond returns after inflation, alongside weaker stocks and a weaker dollar. It would show markets cutting AI spending forecasts.
Friday’s trading did not show that mix, as the dollar held firm. Saravelos did not predict a crash. He said dollar risks are more two-sided than markets have priced in recent weeks.
