Good morning investors. Here at Opening Bell Daily we work hard to make sure data — rather than consensus — guides our reporting. We just reviewed new numbers from Morgan Stanley that push back on the popular narrative that tariffs made the American stock market fall out of favor among global investors.

Morgan Stanley says the data are bullish

In the weeks surrounding President Trump’s Liberation Day announcement on tariffs, a narrative emerged that foreign investors were pulling money out of US stocks in search of more certain ground.  

One supposed red flag was that the US stock market lagged most of its international peers to start the year. 

That underperformance remains true today, even with Friday’s record high for the S&P 500. 

But the latest investment flows data challenge the overall bearish narrative, according to Morgan Stanley strategist Vishwanath Tirupattur.

In a Sunday note to clients, he illustrated that weekly data across equity and mutual funds shows international investors have in fact been net buyers since Liberation Day.

“Overall, we don’t find much evidence to support the narrative that foreign investors have been reallocating away from US stocks,” the Morgan Stanley macro team concluded. 

While the pace of buying has slowed compared to last year, it remains “much higher” than the same period in 2021 to 2023, Tirupattur said.

In fact, the data highlight how US investors have actually been the net sellers of domestic equities, while foreign inflows have remained strong. 

Additional flows data from the US Treasury confirm the trend, showing a moderation in foreign demand but no significant selling.

Meanwhile, Japan’s Ministry of Finance — representing a country that holds over $1.1 trillion in US debt — shows Japanese investors remain net buyers of US stocks.

Some analysts have pointed to a declining weighting of US equities in global fund portfolios, though this too appears to be a function of shifting benchmarks rather than a sign of foreign retreat.

“The decline in portfolio weights for US equities has been in line with changes in equity benchmark weights, as the market correction shrank the market cap of US equities as a share of the global equity benchmark index,” Tirupattur said.

“The lower allocation to US equities simply reflects the fact that the US now represents a slightly smaller portion of the benchmark.”

In fixed income, net inflows to US bond funds have stayed positive in 2025, while those into non-US bond funds have weakened.

Morgan Stanley continues to recommend an overweight position in US stocks relative to global peers for several reasons: 

• Stronger earnings revisions breadth in the US versus rest of world

• Expectations for persistent US dollar weakness

• Continued demand for US risk-free assets

• Rising foreign currency hedging activity, suggesting increased exposure to US assets for European investors

As Opening Bell Daily readers know, narratives often outpace data in markets. Yet capital will always follow conviction.

Despite headlines on tariff fears, the numbers show foreign investors are still betting on America.

Market snapshot

Elsewhere

📊 The Big Beautiful Bill cleared a key Senate hurdle. Republicans got one step close to advancing President Trump’s spending package following a procedural vote. Questions remain about whether the package will pass ahead of the self-imposed July 4 deadline. (CNBC)

📈 The stock market rally is moving beyond Big Tech. Financials and industrials have gained momentum, market breadth is improving, and investors are seeing more opportunity outside the richly valued tech sector. Less popular industries could soon get a boost from rate cuts. (WSJ)

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Rapid-fire

• China’s manufacturing activity contracted for a third month as deflation fears grow (CNBC)

• Americans are saving for retirement at record levels (Yahoo Finance)

• Options markets show traders are repositioning for more geopolitical conflict (Bloomberg)

• Nvidia insiders have cashed out $1 billion worth of stock, led by CEO Jensen Huang (FT)

• Goldman Sachs scrapped plans to build a hotel brand in Greece (WSJ)

• Elon Musk said Trump’s big bill will destroy American jobs and cause “strategic harm” to US (CNBC)

• A 30-year trading veteran shared with our Best Ideas Club members the stock he expects to surge 20% this year (Best Ideas Club)

• Bitcoin’s volatility is coming down but that isn’t necessarily a bad thing (Pomp Letter)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

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