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Foreigners Buying US Stocks at Record Pace

Observant1
edited September 28 in Other Investing
I was surprised by foreigners' enthusiasm for US stocks.
Perhaps they are just as captivated by the AI theme as we are?

"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."

"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."

https://www.advisorperspectives.com/articles/2025/09/26/foreigners-buying-us-stocks-record-pace-despite-trade-war

Comments

  • MarkMark
    Yea, I don't get it either.
  • DrVenture
    At the same time the "Buffett indicator" has exceeded 200%. A level that Buffett called "playing with fire".

    Perhaps, time to think some more about lowering my equity exposure.
  • FD1000
    edited September 28
    Where else would you invest LT?

    There’s a group that loves to tarnish the US 24/7, and they did so from 2017 to 2021 and again in 2025.
  • Observant1
    edited September 28
    FD1000 said:

    [snip]
    There’s a group that loves to tarnish the US, and they did so from 2017 to 2021 and again in 2025.

    This isn't about "tarnishing" the U.S. nor is this thread intended to be a partisan political discourse.
  • JD_co
    It feels like the markets are supporting the economy, and not vice-versa.

    The wealthy in the US own equities + bonds, and those investments are doing just fine. The wealthy don't have to care about inflation or job losses, so they continue to spend. This keeps the machine rolling. The other 80% who have to cut back don't really matter in this equation.

    Maybe foreign inflows are supporting stocks or maybe the US markets are simply flying with blinders on, as they tend to do for stretches. Driven by AI, tech, bots, greed. Take your pick.
  • FD1000
    There are so many media outlets, some posing as expert voices, that paint everything in the US as if it’s going down the drain. In my opinion, some people make investment decisions based on politics and the grim stories the media feeds them.

    Just to be clear, I’m not the one making the discussion uncivil or personal.

    Isn't the US the best place to invest LT?
  • Observant1
    edited September 28
    "There are so many media outlets, some posing as expert voices,
    that paint everything in the US as if it’s going down the drain.
    In my opinion, some people make investment decisions based on politics
    and the grim stories the media feeds them."

    Some people do make investment decisions based on politics — often to their detriment.
    The subject is off-topic for this particular thread.


    "Isn't the US the best place to invest LT?"

    The U.S. has been the best place to invest over the past 15 years or so.
    Will it be the best place to invest over the next 10, 15, or 20 years?
    Frankly, my crystal ball is cloudy — I don't know the answer to this question.
  • WABACWABAC
    edited September 28
    A few thoughts come to mind . . .

    I would like to see a breakdown of where that money is coming from. Is it some sort of flight to safety> Or is it wanting to get in on the AI boom?

    I have a feeling that 30% of our equity market invested from overseas is going to be less sticky than money invested domestically, i.e., it might be likely to flee fastest at any sign of trouble.

    Considering the political drift of this thread, this part of the article caught my eye:
    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.
    Well. That's interesting. We're setting records, and all those sleepy country markets are whupping us.

    So I asked my friend Perplexity to scrape the collective wisdom of the internet to learn when, and under what conditions, international equities have out-performed US equities. Perplexity does a nice job of showing the resources it scrapes for its answers.

    The long answer is at the dinky linky. For now I'll skip the history lesson and quote the section on salubrious conditions since foreign beats domestic 40% of the time.
    Conditions Favoring Foreign Equity Outperformance

    Valuation Discounts: Foreign stocks are often priced at substantial discounts to US peers, sometimes at as much as a 35% discount, making them more attractive on a forward-return basis, especially during periods when US valuations are elevated.

    Currency Effects: Periods of US dollar weakness tend to amplify returns for US investors holding foreign equities. Conversely, a strong dollar often dampens relative foreign returns.

    Cyclical Macro Shifts: International equities benefit when global economic growth prospects outside the US are stable or improving, particularly when the US is facing recessions, stagflation, or policy uncertainty (e.g., tariff shocks, higher US interest rates).

    Sector Leadership: Foreign markets with strong sector tailwinds (such as renewable energy in Europe or manufacturing in Asia) can outperform when those sectors are globally competitive.

    Policy and Structural Reforms: Governments outside the US with fiscal capacity and willingness to stimulate growth can boost earnings for local stocks.

    US Market Headwinds: Foreign equities tend to outperform when US equities are affected by factors such as policy-driven uncertainty, overvaluation, or a narrow concentration of gains among a few mega-cap stocks. [In regard to that last insight I'll add that we've boiled our market down from a nifty fifty to a mag7]
  • Sven
    @WABAC, interesting that our oversea funds/ETFs far out-paced that of S&P500. Same goes for bonds too on dollar term. For now i will take a wait and see.
  • WABACWABAC
    edited September 28
    Sven said:

    @WABAC, interesting that our oversea funds/ETFs far out-paced that of S&P500. Same goes for bonds too on dollar term. For now i will take a wait and see.

    I no longer look at etfs for bond funds. PYGSX is about as close as I can get for the duration I'm willing to endure. I am caught between China exporting deflation and Europe running guns and butter with low rates.

    I'm thinking about slowly building a position in EISIX in the IRA as long as the conditions I quoted above are in place.

    I have enough foreign in the taxable thanks to VWIGX, SEQUX, and a few others.
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