As Donald Trump unleashed his trade war, mused about annexing Canada and generally roiled global sentiment toward the US last spring, worries mounted that foreign buyers would boycott American financial products.
When it comes to US equities, the opposite happened. Foreign purchases rose to a record in the second quarter, according to Federal Reserve Board data. Demand has been so brisk that stocks now make up nearly 32% of foreigners allocations to US assets — breaking a record that’s been in place since 1968.
While data show that foreigners have scaled back on travel to the US along with some purchases of US-made products, the American stock market has proven too enticing to quit. Part of that owes to the dominance of firms chasing riches in artificial intelligence, which has swelled the share prices of Nvidia Corp., Microsoft Corp. and Alphabet Inc., among others. And while they have been buying stocks, foreign investors have sent the dollar sharply lower, perhaps hedging exposure to the US.
“While tariffs have led many foreign consumers to boycott US products, US equities remained in high demand,” said Rob Anderson, US sector strategist at Ned Davis Research. Canadians, for example, have been buying US stocks while shunning American products.
Foreigners plowed $290.7 billion into the US stock market in the three months ended June 30, accord to the Fed data. Treasury International Capital (TIC) data showed that as of July, foreign holdings of US equities are on pace to rise by $2.8 trillion this year, said Elyas Galou, director of global investment strategy at Bank of America.
Foreign buyers hold some $18 trillion in US stocks, about 30% of the nearly $60 trillion market, the most in data going back to 1945, according to Fed data cited by Bank of America. The dollar value of their holdings has obviously appreciated with asset prices, though the percentage of the total has climbed.
“International investors are still buying US equities at a very strong pace,” Galou said.
While returns have been solid in 2025, at the index level, the purchases haven’t been as lucrative as they would have been if executed in other major stock markets. The S&P 500 has underperformed equity benchmarks in Canada, Mexico, Brazil, Japan and China, both in local currency and in US dollar terms.
The MSCI World Index has advanced 15% this year and is currently on pace to outperform the S&P 500 for the first time since 2017. The MSCI All-Country World Index with US stocks excluded is outperforming more sharply, rising 22% compared with 13% for the S&P 500.
The foreign purchases came as a “surprise” to Sam Stovall, chief investment strategist at CFRA, though not because of any political calculation.
“Why would they come here if their own markets are hitting record highs?” he said, adding that the weakening dollar would also be a hindrance to returns.
Stovall said his assumption is that foreign investors are buying selectively into the AI theme and focused on large tech companies, which have a unique weighting in the US market. He noted that the tech sector has “scored 26 new all time highs this year.”
And the bet has hardly been a bad one. US stocks have been on a tear since bottoming April 8, with the latest leg higher sparked by the Fed’s first interest rate cut in a year.
The buying spree appears to have kept going into the third quarter, going by fund flows, Galou said. He cited EPFR data that showed international investors have been adding to US equity funds at the fastest pace since March over the course of the last three months.
The investments in the US stock markets may owe to a dispassionate view of financial markets, according to Brian Jacobsen, chief economist at Annex Wealth Management, no matter what foreigners may think of the US government’s positions.
“A lot of foreign holders of US assets who don’t want to hold Treasuries realize that their complaints are against the government and not against companies,” said Jacobsen said.
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