ME News reports that, as of September 15 (UTC+8), analysis by Deutsche Bank shows that over the year ending in June of this year, international capital inflows into U.S. equities averaged 2.8% of U.S. GDP, compared to just 2% flowing into U.S. Treasuries. This marks the first time this century that foreign investment in U.S. stocks has exceeded that in U.S. government bonds, excluding periods following the global financial crisis and the COVID-19 pandemic. The analysis suggests global capital is shifting from U.S. government bonds toward U.S. equities, driven by the AI boom. Meanwhile, U.S. government debt has surpassed $40 trillion, with persistent fiscal deficits pushing the 10-year Treasury yield above 5% for the first time since 2023, and the 30-year yield rising above 5.3%, intensifying investor concerns about the traditional “risk-free” status of U.S. Treasuries. Deutsche Bank notes this reflects a growing divergence: the private sector’s balance sheet continues to expand, while the public sector’s deteriorates. James Turner, Head of Fixed Income at BlackRock, stated that at current U.S. government deficit levels, if the U.S. were a corporation, its financial condition could certainly not be labeled “risk-free.” Meanwhile, U.S. equities remain supported by AI-driven profit growth. The S&P 500 has risen approximately 12% year-to-date, with component company earnings projected to grow 52% year-over-year in Q2 2026—even after excluding special factors from companies like Amazon and Alphabet, earnings still rose 34%. Deutsche Bank highlights that this shift in foreign allocation logic may also reshape the dollar’s pricing mechanism: the dollar could increasingly be driven by capital inflows into U.S. equities rather than the traditional dynamic of “safe-haven demand for Treasuries strengthening the dollar.” However, Robeco warns that if Treasury yields continue rising and push up corporate financing costs, a sharp correction in the bond market could ultimately spill over into equities. (Source: BlockBeats)
Foreign capital has purchased more U.S. stocks than bonds for the first time this century.
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Summary
Foreign capital has shifted toward U.S. stocks over bonds for the first time this century, with inflows averaging 2.8% of GDP over the past year, compared to 2% for Treasuries. Concerns over capital protection may be driving this trend, as investors favor AI-linked equities over government debt. Technical analysis for crypto strategies is also gaining traction, as traders seek alternative safe-haven assets amid shifting market dynamics.
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