Every share of the SPDR S&P 500 ETF Trust (NYSEMKT: SPY) you own, and every Treasury bond in your retirement account, exist inside a market that foreign investors have filled with more than $35 trillion in capital. That figure, from the U.S. Treasury’s most recent annual survey published in June 2025, is up from roughly $31 trillion a year earlier.
Critically, that pool’s growing or shrinking tells you (on a very approximate basis) how much the rest of the world trusts and is attracted to the American financial system. Recently, that trust has come under scrutiny. Let’s look at what’s actually happening and investigate why it matters for your portfolio.
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When a pension fund in Amsterdam or a sovereign wealth fund in Abu Dhabi buys U.S. stocks and bonds, it’s making an implicit bet that the U.S. economy will keep growing, and that the country’s institutions will remain stable.
For decades, that bet paid off handsomely. As measured via the total return of the iShares Core MSCI Total International Stock Market ETF (NASDAQ: IXUS) and the SPDR S&P 500 ETF Trust, the U.S. market grew by 276% over the past 10 years, whereas the international market grew by just 139%.
Then came April 2025. The Trump administration’s tariff policies sparked many murmurs of an ongoing “Sell America” trade, leading to a simultaneous decline in U.S. equities, Treasuries, and the dollar. But private foreign investors, who account for over 80% of foreign holdings, actually then went on to increase their net purchases of U.S. securities to approximately $1.5 trillion in 2025, up from an average of about $1 trillion annually during 2022 through 2024.
In other words, even during a period of unexpectedly erratic governance in the U.S., foreign investors weren’t dumping their holdings, they were loading up. Of course, they might not always behave in the same way; patience has limits.
For now, U.S. financial markets are still the best-positioned for growth in the world. Nonetheless, there are plenty of factors that might change that and encourage international investors to allocate their capital elsewhere.
For instance, increasing levels of state ownership of key businesses, political corruption, weak enforcement of securities laws, and political instability have all historically encouraged investors to exit their capital from countries. To the extent that investors are concerned about these happening in the U.S., it would be a new headwind to domestic stock prices.
