Global ex-U.S. equity funds attracted their largest monthly inflows in over four and a half years in July, as investors moved capital away from U.S. markets due to economic uncertainty, high stock valuations, and a weakening dollar. According to LSEG Lipper, these funds saw an influx of $13.6 billion—the highest since December 2021—while U.S.-focused equity funds experienced $6.3 billion in outflows, marking their third consecutive month of redemptions. Analysts attribute this shift to fading confidence in U.S. economic policies and a search for better opportunities abroad.
The surge in international fund allocations reflects a growing preference for diversification, with Europe and emerging markets gaining traction due to looser monetary policies and improving growth prospects. While trade tensions had eased earlier in the year, unresolved negotiations and looming policy deadlines are now reigniting concerns about U.S. market stability. Shelton Capital Management’s Derek Izuel noted, “Persistent uncertainty could drive further outflows from U.S. equities, especially if growth differentials shrink or the Fed keeps rates restrictive.”
The dollar’s decline has made non-U.S. assets more attractive, while the Federal Reserve’s prolonged tight monetary stance has dampened enthusiasm for American stocks. Investors are increasingly turning to markets where central banks are cutting rates or maintaining accommodative policies, offering higher potential returns. This trend suggests a broader reassessment of global equity exposure, with July’s flows signaling a possible long-term reallocation rather than a short-term adjustment.
The sustainability of this shift will depend on upcoming U.S. economic data, Fed decisions, and trade policy developments. If trade risks escalate or U.S. growth slows further, the exodus from American equities could accelerate. Conversely, a dovish Fed pivot or stronger-than-expected economic performance might stem the outflows. For now, international markets remain in favor as investors seek stability and growth beyond U.S. borders.