Overseas Investors Pour Record $942 Billion into US Stocks in 12 Months

Foreign capital is pouring into U.S. equities at an unprecedented pace, while demand for U.S. bonds has notably cooled over the same period. This structural shift is reshaping the landscape of global capital flows.

Record-Breaking Inflows into U.S. Stocks

According to data from the U.S. Treasury Department, in the 12 months through July, net purchases of U.S. stocks and investment fund shares by foreign investors reached $942 billion — the highest rolling 12-month total since records began in 1985.

Data from the U.S. Bureau of Economic Analysis shows that net purchases in the second quarter of this year surged to $426 billion, a 62% increase compared to the same period in 2025, and surpassing the previous quarterly record of $299 billion set in 2022.

Contrasting Decline in Bond Demand

In contrast, foreign demand for U.S. bonds has declined. In the second quarter, net purchases of U.S. bonds totaled $188 billion, down from $314 billion in the first quarter.

Monthly Trends: Record Q2, Slower July

Monthly data reveals that foreign buying of U.S. stocks accelerated through the second quarter:

• April: $110 billion net purchases
• June: $182 billion net purchases
• July: Sharp drop to $3.7 billion, though foreign investors remained net buyers for the sixth consecutive month.

These inflows align with strong performance in U.S. equities. In the 12 months through July, the S&P 500 rose approximately 20%, led by gains in tech stocks such as SanDisk, Western Digital, and Intel. The index rose 14.9% in the second quarter alone — its best quarterly performance since the same period in 2020 — following a brief but sharp decline triggered by the outbreak of war with Iran.

Analyst Insights

Brad Setser, Senior Fellow at the Council on Foreign Relations, noted that the unusually large second-quarter purchases may partly reflect delayed buying from a weaker first quarter. However, the broader trend remains one of sustained record-breaking foreign purchases of U.S. stocks.

Setser highlighted the strong rally in South Korea's stock market as a key driver. As individual stocks like Samsung and SK Hynix surged, local investors hit concentration limits and were forced to diversify into global assets, particularly U.S. stocks.

"You rarely see South Korea posting net outflows of over $200 billion into global equities, with most of it going to the U.S.," Setser said. "This shift in capital flow patterns is highly consistent with the extraordinary inflows seen against the backdrop of the U.S. dollar."

U.S. Stocks Favored, Bonds Under Pressure

Setser also pointed to the other side of this trend: as the U.S. fiscal deficit continues to widen, foreign demand for U.S. Treasury bonds is weakening, creating potential pressure on U.S. debt financing.

"It feels like the whole world is extremely bullish on U.S. stocks," Setser said.

This dynamic is not a positive signal for the bond market. The shift in foreign demand toward equities and away from Treasuries means the U.S. government, while issuing large amounts of debt, will need to rely more on domestic buyers or accept higher financing costs to absorb supply.

This article is republished from "Wall Street News," author: Zhang Yaqi; edited by Xu Wenqiang for Zhitong Finance.