Foreign capital is madly buying US stocks! Net inflows of $942 billion over the past 12 months, a record since 1985.

Foreign capital is pouring into the US stock market on an unprecedented scale, while demand for US bonds has cooled markedly over the same perioda structural shift that is reshaping the global flow of capital. According to US Treasury data, over the 12 months through July of this year, net purchases of US stocks and investment fund shares by overseas investors reached $942 billion, the highest rolling 12-month total since records began in 1985. Data from the US Bureau of Economic Analysis show that net purchases in the second quarter alone jumped to $426 billion, up 62% from the same period in 2025 and surpassing the previous single-quarter record of $299 billion set in 2022. In contrast, overseas investors' demand for US bonds declined over the same periodnet purchases of US bonds came to $188 billion in the second quarter, down from $314 billion in the first quarter. Record Q2 net buying, momentum slowing in July On a monthly basis, overseas buying of US stocks continued to accelerate in the second quarternet purchases were $110 billion in April and rose to $182 billion in June, but fell sharply to $3.7 billion in July. Even so, overseas investors remained net buyers for a sixth consecutive month. These inflows corroborate the strong performance of US stocks over the same period. In the 12 months through July, the benchmark S&P 500 rose about 20%, with tech stocks such as SanDisk, Western Digital and Intel among the top gainers. The S&P 500 rose 14.9% in the second quarterafter the index had fallen sharply when the Iran war broke out, though the decline was short-livedits best quarterly performance since the same period in 2020. Brad Setser, a senior fellow at the Council on Foreign Relations, noted that the unusually large buying in the second quarter may partly reflect a delayed reflection of weaker purchases in the first quarter, but the broader trend remains one of continued record overseas buying of US stocks. Setser cited the strong rally in South Korean stocks as one important driver. As stocks such as Samsung and Hynix surged, local investors hit concentration limits and were forced to turn to global assets such as US stocks for diversification. "You rarely see South Korea see one-way outflows of more than $200 billion into global equity markets, and most of it goes to US stocks," Setser said. "This shift in capital flow patterns is highly consistent with the extraordinary inflows against the backdrop of the dollar." US stocks favored, US bond demand under pressure Setser also flagged the other side of this trend: against the backdrop of a continuously widening US fiscal deficit, overseas demand for US Treasuries is weakening, putting potential pressure on US debt financing. "It feels like the whole world is extremely bullish on US stocks," Setser said. This situation is not a positive signal for the bond market. A tilt in overseas demand toward equities and away from Treasuries means that, as the US government issues large amounts of debt, it will need to rely on more domestic buyers or bear higher financing costs to absorb supply. This article is reprinted from "Wallstreetcn", author: Zhang Yaqi; GMTEight editor: Xu Wenqiang.