Foreign capital is hypocritical! "Complaining during the day, buying wildly at night." How long can this "hot money" boom in the United States last?

Despite the declining global favorability towards the United States, foreign investors are flooding into the U.S. financial markets at record levels. This contradictory phenomenon of "criticizing the U.S. by day and buying in wildly by night" is pushing the U.S. market into an unprecedented state of dependence—its current account deficit is now almost entirely filled by speculative foreign capital.

On Monday, Ruchir Sharma, a columnist for the Financial Times, stated in his latest article that last year, foreign investors injected approximately $1.6 trillion into U.S. financial assets, with nearly $700 billion flowing into the stock market, both hitting historical highs. From Singapore to Seoul, it has become routine for investors to stay up late using U.S. stock after-hours trading platforms, with the proportion of U.S. stocks held by foreign institutions rising to a record 15%, a 50% increase from a decade ago.

However, this prosperity driven by "hot money" is facing challenges. Direct investments, such as in factories and businesses that cannot be quickly withdrawn, have shown significant weakness among the foreign capital flowing into the U.S. last year, while portfolio investments like stocks and bonds, which can be reversed instantly, dominate. Meanwhile, markets outside the U.S. significantly outperformed U.S. stocks last year, and this momentum is strengthening with the acceleration of global economic growth.

If global investors reduce their purchases of U.S. assets, the impact could cause severe turbulence in the U.S. market. The scale of U.S. dependence on speculative foreign capital has reached unprecedented levels, and what supports all of this is merely the "emotions of strangers."

The Contradiction Behind Record Capital Inflows

The enthusiasm of foreign investors for U.S. assets sharply contrasts with their perception of the United States. Ruchir Sharma recently found during his visits to Asia, Europe, and the Middle East that complaints about the U.S. under Trump are rising sharply, from tariff policies to attempts on Greenland, to a blatant disregard for the old global order. Polls show that global favorability towards the U.S. is plummeting.

However, data shows that even as opinions worsen, capital continues to flow in at an unprecedented pace. Aside from a brief "sell-off of America" wave last April, foreign investors have been big buyers every month in 2025, actively "buying the dip" like American retail investors. The foreign purchase volume of U.S. corporate bonds has also risen significantly.

Foreign institutions currently hold nearly 15% of U.S. stocks, a historic high, which is a 50% increase from a decade ago. The total amount of U.S. assets held by foreign investors has approached $70 trillion, doubling from a decade ago. A few exceptions are central banks, which have been shifting funds from dollars to gold. The only new sign of caution in 2025 is that global investors have hedged their unprecedentedly large dollar exposure more than the previous year.

Inertia and Tech Worship Drive Buying

Investors are heavily buying into a country they claim to increasingly disdain, partly due to inertia. Since the 2008 global financial crisis, the U.S. market has consistently outperformed other regions, and many investors are still chasing past performance. They have become accustomed to believing that, given the enormous scale and liquidity of the U.S. market, there is "no choice" but to invest in it.

The global awe of the U.S. technological leadership continues as well. While Europeans have long been the most enthusiastic buyers of U.S. tech stocks, last year, the largest single source of foreign capital flowing into the U.S. stock market came from South Korea, which has a particularly strong enthusiasm for assets related to the U.S. or artificial intelligence However, the frenzy for AI stocks in the United States is raising existential questions, as it remains unclear which companies will win the AI arms race, and whether they will be American companies. China has shown competitive capabilities, with some of its AI models offering similar performance but at lower training costs. If the AI frenzy subsides, American assets could be hit the hardest. More than half of last year's economic growth in the U.S. was attributed to the billions of dollars invested by American companies in AI infrastructure, along with a capital influx into U.S. financial assets.

Vulnerability of "Hot Money" Dependence

Market trends do not last forever, and the habit of "complaining during the day and buying wildly at night" may be no exception. In response to the dominance and unpredictability of the U.S. market, governments in other countries are seeking to diversify risks. They are signing bilateral trade agreements, relaxing regulations, and increasing investments in defense and domestic technology.

Despite a significant capital influx into the U.S. last year, markets in other parts of the world have significantly outperformed the U.S. This momentum is strengthening as economic growth outside the U.S. accelerates. It is expected that this year and next, the economic growth rate in other parts of the world will reach 1.5 times that of the U.S., with this gap widening compared to recent years. By 2027, the average corporate profit growth rate in emerging markets is expected to be twice that of the U.S., while other developed markets will be 50% faster.

American spending habits are more reliant than ever on the "emotions of strangers." Last year, the scale of foreign portfolio investment inflows was sufficient to fund the entire U.S. current account deficit—and then some. The last time this occurred was in the mid-2000s, when the U.S. market was not as large and the deficit was not as high. The U.S. dependence on speculative foreign capital has never been so high.

Most of the funds that flowed into the U.S. last year arrived in the form of "hot money." Foreign direct investment in factories and businesses, which cannot be quickly withdrawn, is far weaker than the inflow of portfolio investments in stocks and bonds that can be instantly reversed. If global purchases of U.S. assets are curtailed, the impact could severely shock the U.S. market. The current influx pattern, built on contradictory emotions, is facing increasing scrutiny regarding its sustainability