New figures from U.S. equity markets indicate a troubling trend, as foreign investors pull back amid mounting uncertainties and persistent volatility over the past two months.
What Happened: On Sunday, popular investment newsletter, The Kobeissi Letter, posted on X, citing Goldman Sachs data, showed that foreign investors pulled $37 billion from U.S. equities in May, marking the second consecutive month of outflows following a $7 billion withdrawal in April.
This sharp pullback, which also marks the biggest monthly outflow in at least a year, comes amid tariffs and trade tensions that continue to persist, over two months into President Donald Trump’s “Liberation Day” announcements.
Despite a strong domestic equity rally following the temporary 90-day easing of trade tensions starting April 10, overseas capital continues to rotate out of American markets. The year-to-date tally now sits at a net $31 billion in outflows, showing a sharp reversal in sentiment, compared ot $201 billion in net inflows between just November and December last year.
This comes as the SPDR S&P 500 ETF Trust SPY, which tracks the S&P 500, the Invesco QQQ Trust QQQ for the Nasdaq, and the SPDR Dow Jones Industrial Average ETF Trust DIA witnessed strong recoveries over the past two months, and are up 2.48%, 3.86%, and 1.08% year-to-date, respectively.
This exodus suggests that macro risks, including geopolitical instability, currency fluctuations, and concern over U.S. trade and fiscal policy, are all outweighing near-term market optimism.
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“Foreigners are rotating out of US stocks,” the post concludes, highlighting the divergence being seen between investor sentiments domestically and abroad.
Why It Matters: Economist Peter Schiff, who’s been a vocal critic of Trump’s tariffs, pointed out the irony of these outflows way back in April, saying that “Trump thought tariffs would bring capital into America. Instead, it triggered a global run out of U.S. assets.”
This shift is also visible among domestic investors, with international ETFs such as the Schwab International Equity ETF SCHF and the Vanguard Total International Stock Index Fund ETF VXUS, soaring 18.55% and 15.60% year-to-date, respectively, hitting their 52-week highs in recent weeks.
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