Foreign investors are pulling back from U.S. equity markets at an alarming rate, with recent data signaling one of the sharpest sell-offs in years. According to Bank of America Global Investment Strategy and EPFR data, overseas investors withdrew around $6.5 billion from U.S. equity funds in the past week alone, marking the second-largest weekly outflow on record. This level of foreign selling is only surpassed by the $7.5 billion withdrawn during the March 2023 banking crisis, highlighting the scale of this retreat.
The chart titled "Foreigners selling US equity funds" clearly captures the trend, tracking weekly inflows into U.S. equity funds domiciled in the Rest of World (RoW) alongside the 4-week moving average. After a period of steady flows, the latest data shows a dramatic plunge below the zero line, signaling heavy net outflows. The sharp drop, highlighted by the red circle on the chart, shows just how quickly foreign investors are exiting U.S. equity funds. Since 2017, the chart reflects various phases of inflows and corrections, but the current wave of outflows stands out both for its depth and its speed.
The pullback comes at a time when recession fears are growing louder. Recently, JP Morgan announced that the U.S. is likely to head toward a recession, especially after Donald Trump paused tariffs for 90 days — a move meant to ease trade tensions, despite JP Morgan estimating the probability of a recession at around 50%. The pause in tariffs has done little to calm market fears, especially as the ongoing U.S.-China trade war continues to cast uncertainty over the global economic outlook.
Adding to the broader picture, foreign investment patterns across emerging markets (EMs) also reflect shifting sentiment. According to the latest EPFR data, India saw inflows of +$990 million, a sharp reversal from the -$2.3 billion outflow recorded last week. Meanwhile, Korea reported outflows of -$900 million, an improvement from the previous week's record -$5.1 billion sell-off. Indonesia faced outflows of -$831 million, marking the largest withdrawal since August 2023. In Brazil, foreign investors pulled -$634 million, a slight recovery compared to -$949 million the previous week. Taiwan also saw outflows of -$459 million, slightly higher than last week’s -$358 million.
Amid this rising volatility and economic doubt, foreign investors seem to be seeking safety — and gold is emerging as their preferred haven. Gold, widely considered a safe bet during times of financial instability, has recently soared to all-time highs, as investors shift away from riskier assets like equities and towards the security of precious metals.
The scale of foreign holdings in U.S. financial assets makes this trend even more significant. According to Apollo, foreign investors currently hold a massive $18.5 trillion in U.S. stocks, accounting for about 20% of the total U.S. equity market. Their presence is just as strong in the bond and credit markets — with $7.2 trillion in U.S. Treasuries (30% of the total) and another $4.6 trillion in corporate credit (30% of the total) under foreign ownership.
As foreign investors reduce their exposure to U.S. markets amid mounting fears of recession, trade tensions, and global uncertainty, the sharp withdrawal of funds highlights how sensitive markets remain to geopolitical shifts and policy changes. The rush toward gold and away from U.S. equities shows that caution is clearly driving investor behavior — and the financial world is watching closely.
Disclaimer:
The information provided in this article is for educational and informational purposes only and should not be considered financial advice. Investing in stocks, gold, or any other financial instrument involves risk. Readers are advised to conduct their own research and consult with a qualified financial advisor before making any investment decisions. The opinions and data mentioned are based on publicly available sources and are subject to change without notice. The author and the website are not responsible for any financial losses or gains resulting from investment decisions based on this content.
