Foreign stocks have been outperforming US stocks since early last year. Contributing to this outperformance has been the weakening dollar over this period (chart). That's fueled lots of chatter about the so-called "Sell America Trade" and dedollarization. That's a bit ironic considering that during 2024 the chatter was about "American Exceptionalism."
We aren't giving up on the dollar even though we did recommend underweighting US stocks and overweighting overseas stocks on December 7, 2025. We did so because the US MSCI market-cap share rose to a record 65% early last year. We figured that might be a peak for the US. Investors had fully discounted American Exceptionalism, and it made sense that their focus would turn to the exceptionally low valuations carried by the stocks of many exceptional foreign companies.
Meanwhile, the monthly US Treasury International Capital System (TICS) shows that net capital inflows from foreign investors were significant last year. They were buyers, not sellers, in the US capital markets on balance. Private and official accounts purchased $1.4 trillion in US securities during 2025 (chart).
The net capital inflows of foreign official accounts amounted to just $31.7 billion last year (chart).
Net purchases of US bonds and equities by private foreign investors totaled $883.4 billion and $658.5 billion in 2025 (chart).
Foreigners held a record grand total of $9.3 trillion in US Treasuries at the end of last year (chart). The holdings of foreign official accounts have been relatively flat around $4.0 trillion since 2012.
The US dollar still accounts for 57% of the foreign exchange reserves held by central banks (chart). That's down from 71% in 1999.
Below are bar charts of 12-month and 3-month capital inflows (charts). Both show solid net purchases almost across the board. There is no sign of a dollar crisis in the TICS data.
