• Foreign investors returned to U.S. stocks and bonds in force in May, just a month after retreating in the wake of President Donald Trump’s unexpectedly aggressive tariffs. New data show record net inflows, as the highest tariff rates were on hold to allow breathing room for trade talks. U.S. stocks have since retaken record highs, though bond yields remain elevated.

Just as American consumers have demonstrated extraordinary resilience amid President Donald Trump’s tariffs, foreign investors apparently have a strong stomach for market chaos.

The most recent data from the Treasury Department shows that foreigners plowed a net $311.1 billion into U.S. securities in May, a record high, after pulling out $14.2 billion in April.

“All this is notable because so many commentators prophesied the end of US ‘exceptionalism’ after the turbulence of recent months,” Robin Brooks, a senior fellow at the Brookings Institution, wrote Wednesday in a post titled “US exceptionalism roars back” on his Substack. “The reality is that markets are far more accepting of all the ups and downs than people realize. US ‘exceptionalism’ is alive and well.”

Meanwhile, for the 12 months through May, net foreign inflows neared their all-time high from July 2023, when they topped $1.4 trillion to mark the peak of the American exceptionalism narrative in markets, he added.

The rebound in May signals a stunning turnaround from April, as Wall Street feared the end of U.S. supremacy in the global economy and markets.

In the immediate aftermath of “Liberation Day,” the S&P 500 flirted with a bear market, crashing nearly 20% from its prior high while the Nasdaq passed that threshold.

The 10-year Treasury yield initially plunged but then soared more than 70 basis points in just days as investors worried top U.S. debt holders would dump their holdings.

But a month later, the opposite happened.

“The hurdle for the US to experience genuine capital flight is high and certainly wasn’t breached in April,” Brooks wrote.

To be sure, the 10-year yield remains above its pre-Liberation Day level, and the dollar has suffered its worst first half in more than 50 years.

And while the S&P 500 and Nasdaq have retaken their prior records and continue to charge even higher, stock indexes in Europe and China are still outperforming U.S. rivals.

Meanwhile, talks with Japan and trade partners have cemented tariffs rates that are higher than the initial 10% baseline. Negotiations with other countries are still ongoing, and failure to reach a deal could send tariff rates even higher.