tl;dr
Foreign investors withdrew $37 billion from US equities in May, marking the second consecutive month of net outflows and totaling a $31 billion net withdrawal year-to-date, according to data from Goldman Sachs cited by analyst Adam Kobeissi. In contrast, retail investors have increased their purchas...
Foreign investors withdrew $37 billion from US equities in May, marking the second consecutive monthly outflow and a year-to-date net withdrawal of $31 billion. This trend indicates a significant rotation out of US stocks despite the market recovery and a 90-day reciprocal tariff pause starting April 10th. The May outflow is the largest in at least 12 months and contrasts sharply with the $201 billion net purchase these investors made in the last two months of the previous year.
In contrast, retail investors have stepped in to support the US equity market by purchasing a record $150 billion in ETFs and individual stocks year-to-date. Specifically, retail buying reached $23 billion in May, following consistent purchases in March and April. This surge in retail investment has helped offset the withdrawal of foreign capital and reflects strong confidence among individual investors, with significant amounts flowing into companies like Tesla.
Despite retail investors' aggressive buying, their portfolios have underperformed relative to the broader market. Retail portfolios are down 2.6% year-to-date, while the S&P 500 has gained 1.0% over the same period. This performance gap highlights the challenges faced by individual investors, even amid high market activity driven by their participation.
The current dynamics of foreign selling paired with retail buying underscore a shifting landscape in US equity markets. While foreign investors pull substantial funds out due to global and economic factors, domestic retail investors remain bullish, investing heavily in ETFs and single stocks. This dual activity raises questions about market sustainability and where the next sources of capital may emerge to support or challenge the market's trajectory.