Foreign demand for our financial assets remains strong
There has been considerable concern lately that foreign investors are growing cold on U.S. stocks, bonds, and other assets—prompting fears that a key support for U.S. financial markets is weakening. The naysayers argue that the nation’s exploding budget deficits are becoming too much for foreign investors to take, pointing to tepid demand at recent Treasury bond auctions as evidence.
But rumors of the death of foreign investment may be exaggerated. According to the latest data*:
- In May, foreign investors purchased $146 billion of U.S. Treasuries. That’s the second-largest monthly amount bought on record.
- They also invested $114 billion in U.S. stocks in May—the fourth-largest month on record.
- The combined total of U.S. Treasury and U.S. stock purchases broke all prior records, at $260 billion for the month (see the chart).
Foreign Investors Bought Record Amounts of U.S. Assets In May
Bloomberg, calculations by Horizon, data as of 05/31/25
All that good news doesn’t completely dispel concerns about foreign demand. While data from the U.S. Treasury Department is highly respected and reliable, it clearly comes with a significant lag time. Furthermore, the dollar weakened in May despite the large foreign inflows noted above—an outcome likely due to increased currency hedging by foreign investors—and has continued to weaken since then.
For now, it appears that U.S. financial assets are not being completely shunned by foreign investors, which suggests to us that this important foundation of domestic asset valuations remains solid. Regional and country-based diversification remains important, of course, but perhaps not because a foreign-driven U.S. market crash is inevitable or imminent.