It’s hard to write a newsletter away from the changes to the world Donald Trump brings. Primarily, because he’s changing where money is being invested and where profits will be made or lost. His continuing pronouncements are intrinsically important for world financial markets, as others react, must react to these sharp changes in US positions. It’s now directly shaping how world leaders allocate their budgets, shifting resources, priorities and alliances in ways that move financial market prices swiftly.

Take the UK and its pledge to add £6bn to government spending on defence. A response to US diktat? Sounds like a lot, but compare this to the sum US tech giants spent on AI in 2025. Microsoft, alone, has promised to spend $80bn this year. The familiar Meta, Amazon et al are spending similar amounts. Is Donald Trump deliberately diverting Europe’s spending to ‘boots on the ground,’ whilst his newly acquired disciples spend on technology to further enhance the US’s dominance? Too much credit perhaps… but if we have learned anything from the wars of the 21st century, the real spoils are not won on the battlefield.

Because in today’s world, it’s not territory that wins wars, it’s capital. And the spoils go to those who attract it. The US has long been ‘great again’ at attracting capital. Foreign investors still love U.S. markets. A whopping 40% of U.S. stocks, and 35% of U.S. bonds are owned by overseas institutions. But this success has caused a problem. And that problem comes in the form of its Net International Investment Position (NIIP). The NIIP is the difference between what a country’s residents (including its government and businesses) own in foreign assets, and what overseas investors own of that country’s assets. If a country’s NIIP is positive, it owns more abroad than foreigners own of it and vice versa. The US has a hugely negative NIIP, to the tune of $23.6 trillion – or 83% of its GDP! It’s a big debtor to other countries…

That sort of debtor position of -70% or more of GDP mattered during the Euro crisis. Remember the PIIGS. When Portugal, Ireland, Italy, Greece and Spain imploded, in the aftermath of the financial crisis? Had they kept their domestic currencies, their currencies would have collapsed. The key point though was not just debt levels. It was the dependence on foreign capital to roll over that debt, in other words, they needed continuous inflows from abroad to keep things going. So, when foreign investors wanted their money back, the result was a brutal recession.

Of course, the U.S. is not Greece. It issues the world’s reserve currency, has the deepest capital markets, and the Fed can print dollars. But the same mechanics apply. A country with a deeply negative NIIP is living off the confidence of others… I could almost stop there. But I won’t!

America’s prosperity has long been propped up by foreign cash. But if that confidence fades, the NIIP story won’t just matter to economists. It will hit everyone, from Wall Street to Main Street. In the 21st century it’s not tanks that matter, not boots on the ground, but trust. Expect a weak dollar in the months ahead, there is a NIIP in the air…

By Craig Harper, Managing Director