U.S. Stock Rally Drawing Overseas ETF Investors

As the S&P 500 hits all-time highs going into in early February, global investors are seeking exposure to U.S. equities to reap returns this year. 

Canadian and European investors have invested more money in ETFs that offer exposure to U.S stocks this year than Americans, according to a Feb. 8 Bloomberg Intelligence report by ETF analysts Rebecca Sin and Athanosios Psarofagis. 

More than 50% of Canada’s flows (51%) and 48% of Europe’s have poured into U.S. stock ETFs this year, according to the report. At the same time, domestic investment in U.S. stocks has thus far measured much lower than average; 38% of American investors have turned to U.S. stocks in their ETF portfolios, compared to the usual average of 67%. 

Strong earnings from companies such as Apple, Meta, and Disney have bolstered the U.S. equities market, along with a positive jobs report from the U.S. Bureau of Labor Statistics and the easing of inflation. The S&P 500 is hovering at the 5,000 level, a remarkable milestone that has pushed U.S. equity ETFs to new heights. 

Many European investors are vying to capitalize on the market rally this year, as they tend to have less exposure to the U.S. markets compared to American investors. 

“Given that 80% of U.S. ETF assets are already in domestic exposures, there may be little room to expand that share,” the authors of the Bloomberg report wrote. “Just 9% of the Asia-Pacific regions equity ETF assets are allocated to the U.S., partly due to limits on foreign exposures.” 

SPY Sees Outflows

While U.S. equities continue to draw international investors, far fewer Americans have allocated towards U.S. stocks in 2024—and at half the dollar amount. Domestic investors added $3.7 billion to U.S. equities, compared to $7.4 billion for Europeans, according to Bloomberg.

Investors have simultaneously drained the stalwart SPDR S&P 500 Trust ETF (SPY), the largest market weight U.S. fund, despite its performance. Investors have collectively pulled out $29.2 billion out of SPY this year alone, causing the most outflows of any ETF, according to etf.com data. The world’s largest ETF at roughly $487 billion and one of the most established—it dates to 1993—SPY has seen those outflows as traders use the fund as a short-term trading tool., That noted, the flowswingsmay not match what’s happening in the larger market. 

Contact Lucy Brewster at [email protected].