JPMorgan: Foreign Investors Will Return as Retail Buyers Fuel U.S. Stock Rally

Retail investors have played a major role in powering this year’s market gains — and JPMorgan believes they’re about to take the lead again.

In a new report, strategist Nikolaos Panigirtzoglou and his team forecast a massive $500 billion in net inflows into U.S. equities over the second half of 2025, with retail investors expected to contribute around $360 billion of that total. The result? Potential gains of 5% to 10% by year-end.

After aggressively buying the dip in March and April, retail investors pulled back in May and June to lock in profits. But JPMorgan says this was a temporary pause — not a sign of fading interest. “We expect retail investors to resume equity buying and continue supporting the market from July onward,” the strategists wrote.

Other investor groups may offer limited upside. Hedge funds have already boosted their equity exposure and likely won’t add much more. Quantitative funds, which reduced positions earlier in the year, could re-enter later. Pension funds and insurers, however, are expected to keep selling stocks as they rotate toward bonds — with estimated outflows of $360 billion this year.

One surprising potential source of renewed demand? Foreign investors. According to JPMorgan, overseas buyers have largely stayed on the sidelines since February — a trend they describe as a short-term “boycott” of U.S. equities. But that’s unlikely to continue for long.

“Foreign investors can’t ignore the most dynamic part of the global equity market — the S&P 500 and the Magnificent 7,” the strategists said.

The key to their return may lie in currency stability. A weaker dollar has discouraged international investment, but the ICE Dollar Index (DXY) is now hovering near its April lows around 98. If the dollar stabilizes, JPMorgan believes foreign inflows could rebound by another $50 billion to $100 billion.

Combined, these factors could drive nearly half a trillion dollars into U.S. equities in the months ahead — and fuel another leg of the rally.