MW Concerns about a 'sell America' trade are overstated, a top IMF official says

By Greg Robb

Investors are repricing to risk, but there are no major outflows, IMF's Tobias Adrian says

Volatility in Treasury bonds and weakness in the dollar do not represent an inflection point in terms of how global investors view U.S. assets, but rather a repricing due to the rising uncertainty about economic policy, the International Monetary Fund's top financial-market watchdog said Tuesday.

Since the global financial crisis of 2008-09 there have been tremendous inflows into U.S. assets, with investors from around the world seeing the U.S. as an attractive place to invest.

"We have seen a repricing, but we haven't seen a tremendous amount of flows out of the U.S. There have been some flows out, but relative to the cumulative inflows, it's very small. It's more a repricing than a reversal of flows at the moment," said Tobias Adrian, the IMF's managing director of monetary and capital markets, in an interview with MarketWatch.

Investors have been buffeted by extreme market volatility in the weeks since President Donald Trump laid out his tariff plans on April 2. Stocks have sold off sharply, with the S&P 500 SPX suffering its largest four-day fall since March 2020. Losses have moderated somewhat, but stocks have continued to see large intraday swings.

Most notably, the U.S. dollar DXY and U.S. Treasurys BX:TMUBMUSD10Y have also sold off sharply, failing to fulfil their typical role as havens during periods of broader market turmoil and causing investors to wonder if a significant shift away from U.S. assets may be under way. The sharp rise in Treasury yields following the tariff announcement sparked a round of jitters over forced deleveraging of positions by hedge funds as they unwound popular trades.

Adrian said markets have functioned very well, adding that there is some indication that leverage has come down but that it has been fairly orderly.

The rise in term premia is more of a return to normal from the unusually low levels seen from 2010 to 2020, he said.

Recent weakness in the dollar is not cause for concern, he said.

"The dollar had been running up quite a bit, and now it's down a little bit, but we're in a period of high volatility, so we're not reading too much into that at the moment," Adrian said.

Adrian said independence of the Federal Reserve is very important to keeping inflation under control.

When central banks aren't independent, politicians may put pressure on central banks to lower interest rates. This can boost growth in the short run, but then inflation pressures accumulate and the public starts to expect higher inflation, which only fuels higher prices, he said.

Adrian's remarks came as the IMF released its latest report on market conditions.

It warned that risks to stability have increased significantly, primarily due to a tightening of global financial conditions. This adds to worries about economic growth around the world.

Adrian noted that the IMF is forecasting that the global economy will grow at an annual rate of 2.8% this year. The rule of thumb is that any level of growth below 2% would be a recession in the global economy.

"Of course there's differentiation across countries, but we're not forecasting a global recession, right? So we do forecast lower growth, but it's not as dramatic as as some analysts make it out to be," Adrian said.

Despite the recent turmoil, valuations remain high in some key segments of equity and corporate bond markets, meaning that weakness could go further if the outlook were to deteriorate.

-Greg Robb

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April 22, 2025 10:24 ET (14:24 GMT)

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