Foreign investors bought $187 billion in U.S. equities during the last quarter, making them the biggest buyers during the recent bear market, according to Goldman Sachs. They are expected to buy $300 billion worth this year and replace corporations as the largest source of equity demand. Over the last two decades, the bigges🅷t driver of foreign investor equity demand has been a weakening U.S. dollar, and FX strategists estimate the greenback may fall by more than 20% from its recent peak.

Goldman analysts predict net corporate equity demand will drop by 80% in 2020 to $100 billion as buybacks are suspended. Corporations bought equities worth $129 in Q1. Pension funds (-$119 billion) and mutual funds (-$66 billion) were the biggest net sellers in Q1, and they are expected to remain net sellers for the year.

Households (which includes hedge funds) bought just $7 billion of U.S. stocks in Q1, but will be net buyers in 2020 with $280 billion in equity demand, according to Goldman's predictions. For comparison, this group purchased stocks worth $11 billion in 2019. "Broker data show a surge in retail equity trading activity, and a basket of retail favorites has outperformed both hedge fund and mutual fund favorite positions since the March 23 low. Perhaps even more than for other investor types, the pace of viral spread and path of economic normalization will be key determinants of household equity flows. In addition, political uncertainty, particularly regarding personal tax rates, represents a risk to our forecast," said the report.

Retail favorites with the highest returns since the March 23 trough are Penn National Gaming Inc. (PENN), Moderna Inc. (MRNA), Tesla Inc. (TSLA), Royal Caribbean Cruises Ltd. (RCL), Snap, Inc. (SNAP), MGMResorts International (MGM), Spirit Airlines, Inc. (SAVE), Norwegian Cruise Line Holdings Ltd. (NCLH), GoPro Inc. (GPRO), and Marathon Oil Corporation (MRO).

Aggregate equity allocation among households, mutual funds, pensions, and foreign investors fell from 46% at the start of the year to 40% at the start of Q2. Cash allocation rose by around $2 ꦆtrillion to 15% 𓃲of financial assets as record amounts flowed into money market funds. Equity allocation is expected to have rebounded to 44% as the stock market surged and retail investors rushed to day trading.