Foreign Investors Aren't Following The Dollar-Is-Bad Script

By most accounts, almost everyone is bearish on the dollar. Nearly everyone is selling dollars to buy euros and gold, according to this widely held view. Global investors are rebalancing their equity portfolios out of US stocks into European stocks. The only problem with this narrative is that the monthly capital flows data collected by the Treasury International Capital System (TICS), which was updated on Friday, show that US foreign net capital inflows rose to a record-high $1.74 trillion in the 12 months through June.

It's hard to see any sign of the rebalancing of global equity portfolios in the latest TICS data. Over the past 12 months through June, US net capital inflows by private foreign investors rose to a whopping record of $653.6 billion (chart). A word of caution: The past four record highs in foreign inflows into US equities preceded the previous four bear markets.