Foreign capital flows into US stocks hit record as appetite for debt fades
Overseas purchases of US equities topped $940bn in the year to July, coinciding with strong gains in the S&P 500
Michael Taffe and George Steer in New York
Foreign investors made a record $942bn in net purchases of US equities and investment fund shares in the 12 months to July, accelerating a shift in overseas investment towards American stocks and away from debt.
The flows represented the highest rolling 12-month total in Treasury data going back to 1985.
Net purchases of US equities and investment fund shares by foreign investors jumped to $426bn in the second quarter, up 62 per cent from the same period in 2025, and surpassing the previous quarterly record of $299bn in 2022, according to the Bureau of Economic Analysis.
Monthly Treasury data show net purchases gained momentum through the second quarter, from $110bn in April to $182bn in June, before slowing to $3.7bn in July.
Foreign investors remained net buyers for a sixth consecutive month.
The foreign inflows coincided with a gain of about 20 per cent for Wall Street’s benchmark S&P 500 in the year to July, with tech stocks including Sandisk, Western Digital and Intel among the best performers.
The S&P 500’s 14.9 per cent gain in the second quarter — which followed a sharp but shortlived sell-off triggered by the outbreak of the war in Iran — was its best run since the same period in 2020.
The second-quarter surge was unusually large even compared with the elevated foreign demand of the past year.
Foreign investors bought $263bn of US equities and funds in the second quarter of 2025 and $274bn in the final three months of last year.
Foreign demand for US debt moved in the opposite direction.
Overseas investors bought a net $188bn of US debt securities in the second quarter, down from $314bn in the first.
That came as China’s reported holdings of US Treasuries fell to $618bn, their lowest level since August 2008, as Beijing diversifies into gold, agency bonds and other assets.
Some of the second-quarter increase may reflect purchases deferred from the unusually weak first quarter, said Brad Setser, a senior fellow at the Council on Foreign Relations, but the broader trend remained one of record buying of US equities.
Strong equity markets in geographies including Korea and Taiwan led their investors to seek US equities to address concentration risk.
“Those Korean stocks were going up — Samsung, Hynix — and investors who had bought them in the past were hitting concentration limits and diversifying out of Korea into US equities or other global equities.
You just rarely see $200bn-plus of outflows from Korea into global equities, mostly US equities,” Setser added.
“There’s been a shift in patterns of flows that’s very consistent with this larger-than-usual inflow with the US dollar.”
The flip side, he added, was less overseas demand for Treasuries at a time when the US is running a large fiscal deficit.
“It feels like the world is very high on US equity,” Setser said.
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