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US Investment Position Experiences Shock From Production Changes

U.S. net international investment position was –$12.06 trillion at the end of the first quarter of 2020, according to the U.S. Bureau of Economic Analysis. What Happened

Benzinga · -

U.S. net international investment position was –$12.06 trillion at the end of the first quarter of 2020, according to the U.S. Bureau of Economic Analysis.

What Happened

Assets totals from the first quarter equaled $26.77 trillion and liabilities totaled $38.82 trillion. The net international investment position decreased over $1 trillion dollars from the fourth quarter of 2019.

U.S. assets decreased by $2.39 trillion, to a total of $26.77 trillion at the end of the first quarter. This decrease was driven in part by a decrease in portfolio assets. Portfolio investment assets ended the quarter at $10.99 trillion, a $2.39 trillion decrease from the fourth quarter.

Net International investment is the difference between U.S. residents’ foreign financial assets and liabilities.

Why It’s Important

The drop was in large part due to the very sudden and unexpected events surrounding the COVID-19 pandemic. Globally, production was either slowed or halted which led to drastic declines in global stock prices.

U.S. currency appreciated to many foreign currencies and there is a shortage of U.S. currency in foreign markets as a result of limited production. The Federal Reserve partook in several currency swaps with foreign banks in an attempt to alleviate these liquidity shortages. As a result, the U.S. took on record levels of assets and insurance of liabilities.

What’s Next

The second-quarter report will be released on Sept. 29. Expect another drop, most likely larger, as much of the second quarter worldwide was spent participating in a constricted economic market.