Foreign investors are loving the U.S. stock market
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Foreign investors bought a record $426 billion in stocks and investment fund shares in the second quarter, according to data from the Bureau of Economic Analysis out Thursday.
Why it matters: The AI boom is attracting loads of overseas money, and the flood of dough counters a prevailing notion that the U.S. is losing ground with foreign investors.
- It also helps explain why the dollar has strengthened against other currencies over the last two months.
- The dollar's surge is also a result of the Federal Reserve raising interest rates, as well as the rising cost of oil, which is priced in dollars.
The big picture: These investments made up more than 40% of nearly $1 trillion (!) in overall foreign money flowing into the U.S. — assets like loans, bonds and direct investments over that period.
- That's the highest inflow since the first quarter of 2020 — when the pandemic freakout drove a desperate need for dollars globally.
Between the lines: The inflow of money to U.S. assets is the flip side of the trade deficit in goods that has some policymakers worried.
How it works: U.S. consumers and companies pay dollars to import goods into the country. Foreigners use some of that money to invest in U.S. assets.
Yes, but: What flows into the stock market can also flow out.
- The more worrying sign might be the falling share of foreign governments buying up U.S. government bonds, as we've been reporting.
