Buyers' strike by international investors for U.S. equities is over: JPMorgan

JPMorgan analysis indicates foreign institutional investors ended their 'buyers' strike' on U.S. equities in May, purchasing $114 billion in U.S.-domiciled ETFs, marking the largest net inflow since November 2024. This significant return, predominantly from institutional and hedge fund capital, contrasts with earlier foreign retail investor disinterest and follows a period where European and Japanese equities absorbed substantial cross-border inflows. The trend also extended to fixed income, with U.S. Treasurys resuming positive inflows and European bonds attracting $109 billion in May.

Analysis

A significant shift in international capital flows occurred in May, as foreign institutional investors and hedge funds ended a multi-month 'buyers' strike' on U.S. equities. According to JPMorgan analysis, this cohort injected $114 billion into U.S.-domiciled ETFs, the largest net purchase since November 2024. This move contrasts sharply with the first four months of 2025, when these investors largely avoided U.S. stocks, a reluctance likely driven by a declining dollar that eroded unhedged returns. The return of institutional money, which can effectively deploy currency hedging, marks a renewed conviction, further evidenced by the $35 billion in purchases from Caribbean-domiciled funds, a common proxy for hedge fund activity. This pivot towards the U.S. follows a period where capital was directed elsewhere; European equities absorbed $95 billion in early 2025 before seeing modest outflows, while Japan attracted $44 billion. The trend extends to fixed income, where U.S. Treasurys also saw inflows resume after a brief $31 billion outflow in April, and European bonds attracted a substantial $109 billion in May, signaling a broad, renewed appetite for developed market assets with a recent, sharp focus on the United States.

Key Decisions for Investors

• Given the substantial $114 billion inflow from foreign institutions, investors should consider if this renewed institutional support for U.S. equities warrants increasing exposure, as it marks a major reversal from the risk-off positioning seen earlier in the year.
• The data indicates a potential major rotation away from recent European and Japanese equity favorites; it is critical to monitor subsequent monthly flow data to confirm if this is a durable strategic shift or a short-term tactical allocation.
• Since institutional buying was facilitated by currency hedging, investors should closely monitor the U.S. dollar, as its stabilization or appreciation could attract further unhedged capital and amplify the momentum in U.S. large-cap ETFs.