Global investors shift toward international stocks as BofA predicts new market order
Global investors are directing significantly more capital toward international equities than US stocks for the first time in nearly a decade, a trend Bank of America analysts describe as the emergence of a “new world order” in financial markets.
Data cited by Bloomberg from a Bank of America report show that about $104 billion has flowed into developed international equity funds this year, including markets in Europe and Japan. By comparison, US equities attracted only about $25 billion during the same period, creating a four to one investment gap.
The shift reflects diverging market performance. The Vanguard Total International Stock ETF has climbed roughly 11 percent since the start of the year, while the S&P 500 has remained largely flat through early March. The technology heavy Nasdaq 100 has performed even worse, slipping more than 1 percent as investors reassess the high valuations of major US technology companies.
European markets have been among the biggest beneficiaries of the trend. Britain’s FTSE 100 surpassed the 10,000 point threshold on the first trading day of 2026, marking what analysts described as a historic milestone following the index’s strongest annual performance since 2009. The index posted gains of about 14.6 percent from the start of the year through February.
Germany’s DAX also reached a record high of 25,507 points in January, supported by signs of recovery in European manufacturing and rising defense spending across the region, although the index has eased somewhat in recent weeks.
Valuation differences between US and international markets have become increasingly pronounced. The S&P 500 currently trades at a price to earnings ratio of about 27.6, compared with roughly 14 for the FTSE 100 and about 19.1 for the Vanguard international ETF.
Forecasts from Vanguard suggest the shift may persist. In its 2026 economic outlook, the investment firm projected that international equities could deliver average annual returns between 4.9 percent and 6.9 percent over the next decade, compared with expected returns of roughly 4 percent to 5 percent for US stocks.
Researchers at the firm argue that many US technology companies already reflect extremely optimistic earnings expectations, leaving limited room for additional upside even if artificial intelligence driven growth continues.
Currency movements have also contributed to the shift. A weaker US dollar has increased the relative returns of international assets for American investors.
Bank of America strategist Michael Hartnett attributed the trend partly to the trade policies of the Trump administration, which he said are encouraging a global investment dynamic characterized by “anything but the dollar.” The shift reflects what he described as a gradual rebalancing away from the era of US market exceptionalism.
Emerging market equity funds have also seen strong inflows. Bank of America data show that $15.4 billion flowed into emerging market funds in January alone, the highest monthly total on record.
Analysts say the renewed interest in overseas markets could also reshape investor sentiment in regions that have long struggled to attract global capital. According to AJ Bell analyst Danni Hewson, strong early year performance in the United Kingdom could help shift perceptions that had previously weighed on British equities.
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