International equities are likely to outperform U.S. stocks during the latter half of the 2020s, according to Bank of America strategists led by Michael Hartnett.
In their latest Flow Show report, the team argued that a shift in the global economic landscape is underway, writing that a “new world order = new world bull,” with non-U.S. markets positioned to regain market share following an extended period of American equity dominance. Currently, the rest of the world accounts for about 38% of the $97 trillion global equity market, compared with 62% represented by U.S. stocks — a disparity the strategists expect to gradually narrow.
Hartnett and his colleagues pointed to several structural factors that could drive a rotation toward international markets, including expanding fiscal deficits, the rise of populist policies, and what they describe as the “end of deflation.” They also suggested that the economic impact of artificial intelligence could prove more challenging for the United States than for many overseas economies.
“AI disruption [is] more labor market and/or corporate revenue negative to services-heavy U.S. GDP & SPX index than manufacturing/resource-heavy EAFE/EM macro & equity indices,” the strategists wrote.
Flow data cited in the report showed strong investor demand for risk assets. Global equity funds attracted $38.1 billion in inflows during the week ending February 25, while money market funds drew $38 billion and bond funds received $16.8 billion. Gold funds recorded $6.2 billion in inflows, and cryptocurrency funds added $300 million.
By region, U.S. equity funds posted their fifth consecutive week of inflows totaling $2.2 billion. European funds extended their streak to four weeks with $3.2 billion, while emerging markets led globally with $15.4 billion in inflows. Japanese equity funds attracted $1.9 billion.
Sector flows showed financial stocks experiencing $2.2 billion in outflows — the largest withdrawal since April 2025. Meanwhile, equity funds focused on South Korea attracted $3.7 billion, lifting year-to-date inflows to $21 billion, already the highest annual total on record.