Foreign inflows into U.S. equities reach record as Treasury demand weakens
Record equity buying through July
As reported by Financial Times, foreign investors make a record $942 billion in net purchases of U.S. equities and investment fund shares in the 12 months to July, extending a broader rotation toward American stocks. The total marks the highest rolling 12-month level in Treasury data going back to 1985.
Net purchases of U.S. equities and investment fund shares rise to $426 billion in the second quarter, up 62 per cent from the same period in 2025 and above the previous quarterly record of $299 billion in 2022, according to the Bureau of Economic Analysis. Monthly Treasury data show momentum building through the second quarter, from $110 billion in April to $182 billion in June, before slowing to $3.7 billion in July, while foreign investors remain net buyers for a sixth straight month.
The inflows coincide with about a 20 per cent gain in the S&P 500 in the year to July. Technology stocks including Sandisk, Western Digital and Intel rank among the strongest performers, while the index’s 14.9 per cent advance in the second quarter is its best quarterly run since the same period in 2020.
Shift in global allocation patterns
Brad Setser, a senior fellow at the Council on Foreign Relations, says part of the second-quarter jump may reflect purchases deferred from an unusually weak first quarter, but he says the wider pattern still points to record buying of U.S. equities. He adds that strong stock markets in places including Korea and Taiwan encourage investors to buy U.S. shares to reduce concentration risk.
Setser says Korean investors in particular are moving money abroad after domestic holdings such as Samsung and Hynix approach concentration limits. He says such outflows into global equities, mostly U.S. equities, are unusually large and fit a broader change in capital-flow patterns alongside the dollar.
The counterpart to that trend is weaker overseas demand for Treasuries at a time when the U.S. is running a large fiscal deficit. The shift suggests foreign appetite is favoring U.S. equity exposure over government debt.
In our earlier article on the surge in U.S. Treasury yields above 5%, we explained how higher oil-linked inflation pressures and heavy borrowing needs helped drive the global bond sell-off. We also noted that rapid yield moves can trigger forced deleveraging and spill over into other assets, tightening financial conditions and raising borrowing costs for households, companies, and highly indebted economies.
Source: Tradersunion