---
title: "The halo of 'America First' fades! U.S. stocks lag behind, funds accelerate flow to European and Asian stock markets"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/277467054.md"
description: "As artificial intelligence and policy dilemmas persist, the halo of the America First concept is gradually fading, and investors are beginning to shift their funds towards European and Asian stock markets. Companies in these markets are valued lower, but their earnings growth prospects are similar to those in the United States. The S&P 500 index is fluctuating near historical highs, while the MSCI Global Index, excluding U.S. stocks, has risen nearly 5%, marking the largest outperformance since 2009. Despite the escalation of conflicts in the Middle East, investor interest in U.S. stocks has weakened, and the proportion of funds flowing into U.S. stock funds has significantly decreased"
datetime: "2026-03-02T12:54:57.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/277467054.md)
  - [en](https://longbridge.com/en/news/277467054.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/277467054.md)
---

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# The halo of 'America First' fades! U.S. stocks lag behind, funds accelerate flow to European and Asian stock markets

According to Zhitong Finance APP, as artificial intelligence and policy dilemmas persist, the halo of the "America First" concept is gradually fading. The U.S. economy's excessive reliance on technology and services, coupled with the chaotic trade policies of the Trump administration, has complicated long-term business planning and contributed to a shift in investment preferences—rotating towards non-U.S. stock markets. Investors are being attracted to European and Asian markets, where company valuations are lower, but profit growth prospects are similar to those of the U.S. stock market. Some strategists predict that the story of structural valuation re-evaluation is just beginning.

The S&P 500 index fluctuated near historical highs in February, with a sell-off quickly offset by buying on dips. Ultimately, the index remained largely in place. In contrast, trading conditions in overseas markets were much more optimistic.

The MSCI Global Index, excluding U.S. stocks, rose nearly 5%, outperforming the U.S. benchmark stock index, marking the largest outperformance since the deep declines during the financial crisis of 2009. Since 2026, the performance of the U.S. stock market has lagged behind the global stock market by more than 9 percentage points. Last year, the international stock market outperformed the U.S. stock market by 12 percentage points, achieving the best outperformance since 1993.

Despite the sharp escalation of conflicts in the Middle East disrupting U.S. and global markets, this trend seems likely to continue. UBS strategists have downgraded the weight of U.S. stocks to neutral—this was not originally a disgraceful move, but for a market that gathers the world's most valuable companies, it is somewhat embarrassing. Moreover, investors have already slowed their investment pace; according to Bank of America data, this year, only $26 out of every $100 flowing into stock funds has gone to the U.S.

![ce8101e76373ed5228076e943154e9f8.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260302/1772455486751327.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

The reasons for the shift in investment preferences have been long-standing. The U.S. economy's excessive reliance on technology and services makes it highly susceptible to the impacts of artificial intelligence tools. The chaotic trade policies of the Trump administration have also made long-term business planning exceptionally complex. Additionally, investors believe that the U.S. assets have performed well for a long time, and new leaders will eventually emerge.

In recent weeks, the latter point has become increasingly important, as investors examine European and Asian markets and find that these companies are cheaper than U.S. companies, yet have similar profit growth prospects.

Alessandro Valentini, Director and Fundamental Portfolio Manager at Causeway Capital Management, stated, "Our explanation for this is very simple: the equity risk premium in the U.S. is close to zero. Outside the U.S., the equity risk premium is higher, which means investors can achieve higher returns for taking on risk. This is crucial, especially after we witnessed market volatility in 2025."

Since the beginning of this year, the U.S. market has been turbulent. The Chicago Board Options Exchange Volatility Index (VIX) has repeatedly breached 20. Actual volatility has reached its highest level since November of last year, and intraday fluctuations have further expanded Most of the turmoil stems from the so-called "artificial intelligence panic trading," which has repeatedly impacted various market sectors since February. However, the Trump administration has also deeply intervened in industrial and business policies, sometimes artificially supporting winners in certain industries, which is at odds with long-standing capitalist practices.

Moreover, the U.S. Supreme Court overturned most of President Trump's tariff plans, leaving businesses and consumers confused about current policies. The White House has implemented a 10% global tariff and is preparing to raise tariffs to 15%, but these tariffs will only last for 150 days unless authorized by Congress—this is unlikely to happen before the midterm elections in November.

Gina Martin Adams, Chief Market Strategist at HB Wealth Management, stated, "This may continue to drive non-U.S. domestic assets to perform better. Policy volatility challenges the assumption that the U.S. market will continue to be the most investor- and business-friendly, so capital may continue to diversify into other globally stable regions."

According to fund flow data tracked by Bank of America, more and more investors agree with this view. Michael Hartnett, Chief Investment Strategist at Bank of America, noted that the unpopularity of U.S. stocks relative to international peers has exceeded five years. However, this data does not completely negate the current state of the U.S. stock market; it simply indicates that the U.S. stock market is no longer as unique as it once was.

Aniket Shah, Global Head of Washington, Sustainability, and Transformation Strategy at Jefferies Group, stated that the volatility of U.S. policies has become a long-term positive factor for other regions of the world. He said, "The policy situation in the U.S. has certainly become more uncertain. Investors will ask: Do I really need to put 80% of my assets in a country with somewhat unstable policies? Perhaps not."

According to Adrian Helfert, Chief Investment Officer at Westwood Multi-Asset Strategies, European stocks, especially in the industrial, defense, and banking sectors, are the most attractive. Increased government spending in Europe on infrastructure, energy projects, and armaments should boost these sectors. He also noted that financial companies in the region would benefit from this.

"This is not a 'storm avoidance' trade, but rather a structural reassessment story that is still in its early stages," he said.

Even after the decline in February, the S&P 500 index is still less than 2% away from its historical high, with a price-to-earnings ratio (based on expected earnings over the next 12 months) exceeding 20 times, still higher than valuation levels in other regions. Meanwhile, U.S. corporate earnings growth may have peaked, making it difficult to justify paying a premium.

Soliane Varlet, a portfolio manager at Mirova in Paris, stated, "The valuation of the U.S. market is still higher than that of the European market. So there is still controversy regarding valuations." She also mentioned that Europe "has more positive news, while the U.S. market may have more uncertainties."

The weakening of the dollar is also noteworthy, as it may bring more benefits to emerging markets. Jung In Yun, CEO of Fibonacci Asset Management Global in Singapore, stated, "If these dynamics lead to a structural weakening of the dollar, then the rationale for geographically diversified investments becomes even stronger." In this environment, the crowded positions in the U.S. are experiencing profit-taking, with funds gradually rotating into other stock markets, and liquidity dispersing from large tech stocks to a broader range of industries. The likelihood of this situation occurring is increasing

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