Why are foreign investors still flocking to U.S. assets?

Foreign investors continue to pour money into U.S. assets, attracted by the country's strong economic growth and the potential for high returns.

What is the outlook for Federal Reserve policy?

Traders are now only pricing in a 25% chance of a September rate cut by the Federal Reserve, as robust factory data has cast doubt on the need for dovish policy.

Home / Business and Economy / Foreigners Unfazed by Dovish Fed Bets, Flock to U.S. Assets

Foreigners Unfazed by Dovish Fed Bets, Flock to U.S. Assets

Q: How has the U.S. dollar performed recently?

The U.S. dollar has declined by 10% year-to-date, but this appears to be more a reflection of foreigners hedging their U.S. exposure rather than a broader trend of "de-dollarization."

21 Aug

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Summary

U.S. stocks fall, dollar and yields rise on strong factory data
Traders now see only 1-in-4 chance of Fed rate cut in September
Foreign investors pour record $1.27 trillion into U.S. markets in 12 months

Foreigners Unfazed by Dovish Fed Bets, Flock to U.S. Assets

As of August 21, 2025, the U.S. economy appears to be in reasonably decent shape, despite some concerns over the labor market and public finances. Solid factory data has cast doubt on the Federal Reserve's readiness to lower interest rates next month, with traders now seeing only a one-in-four chance of a September rate cut.

This comes in contrast to the dovish expectations priced into the markets, with traders anticipating around 125 basis points of rate cuts by the end of 2026. However, the latest data on foreign investment in U.S. assets suggests investors around the world remain bullish on the country's growth prospects.

In the 12 months through June 2025, a net $1.27 trillion was poured into U.S. stocks, Treasuries, agency and corporate debt, defying predictions of a "de-dollarization" trend. The strong foreign inflows, which reached a record $643 billion in the first half of 2025, indicate that investors believe the U.S. will continue to offer the strongest growth and returns globally.

This robust demand for U.S. assets comes despite the dollar's 10% year-to-date decline, which some analysts had attributed to a shift away from the greenback. However, the dollar's weakness in recent months appears to be more a reflection of foreigners hedging their U.S. exposure rather than a broader trend of "de-dollarization."

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