Overseas capital is aggressively buying US stocks! Net inflows reached $942 billions over the past 12 months, marking a record since 1985.

Overseas capital is pouring into the US stock market at an unprecedented scale, while demand for US bonds has noticeably cooled during the same period. This structural shift is reshaping the pattern of global capital flows.

According to US Treasury Department data, in the past 12 months up to July this year, net purchases of US stocks and investment fund shares by overseas investors reached $942 billion, marking the highest rolling 12-month total since records began in 1985. Data from the US Bureau of Economic Analysis shows that net purchases for the single second quarter this year surged to $426 billion, up 62% from the same period in 2025, and broke the previous single-quarter record of $299 billion set in 2022.

In contrast, overseas investors’ demand for US bonds declined over the same period — net purchases of US bonds in the second quarter reached $188 billion, down from $314 billion in the first quarter.

From a monthly perspective, overseas capital accelerated its purchase of US stocks throughout the second quarter — net purchases were $110 billion in April, rose to $182 billion in June, but fell sharply to $3.7 billion in July. Nonetheless, overseas investors maintained net purchases for the sixth consecutive month.

This capital inflow corresponds with the strong performance of the US stock market during the same period. In the past 12 months up to July, the benchmark S&P 500 index rose about 20%, with technology stocks such as SanDisk, Western Digital, and Intel leading the gains. In the second quarter, the S&P 500 rose 14.9% in a single quarter — previously, the index plunged sharply due to the outbreak of war in Iran, but the decline was brief — making it the index’s best quarterly performance since the same period in 2020.

Brad Setser, senior fellow at the Council on Foreign Relations, pointed out that the unusually large purchase volume in the second quarter may be partly a delayed reflection of weaker purchases in the first quarter, but the broader trend remains that overseas investors are making record-setting purchases of US stocks.

Setser cited the strong rally in the South Korean stock market as one of the key driving factors. With individual stocks like Samsung and SK Hynix rising sharply, local investors hit concentration limits and were forced to diversify into global assets such as US stocks. "You rarely see more than $200 billion flowing unidirectionally out of South Korea into global stock markets, most of it heading to US stocks," Setser said. "This shift in capital flow patterns aligns closely with the extraordinarily strong inflows under the US dollar backdrop."

Setser also highlighted another aspect of this trend: Amid the ongoing expansion of the 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. With overseas demand tilting towards equities and pulling away from Treasuries, the US government, when issuing large volumes of debt, will need to rely more on domestic buyers or absorb higher financing costs to digest the supply.