Bank of America strategists led by Michael Hartnett expect international equities to outperform U.S. stocks through the back half of the 2020s, according to the team’s recent Flow Show note.
The strategists describe the outlook as a transition to a "new world bull," arguing that global market leadership should become more diversified after a prolonged period in which U.S. listings accounted for the larger share. They note that the rest of the world currently represents 38% of the $97 trillion global stock market, while the U.S. comprises 62% - a gap the team expects to shrink over time.
Hartnett’s team identifies several key drivers behind the anticipated rotation:
- Fiscal excess - elevated fiscal spending patterns that could shift relative economic momentum;
- Rising populism - political trends that may alter policy settings and investment dynamics;
- The end of deflation - a macro regime change that could reshape asset returns across regions;
- AI disruption - the strategists contend that artificial intelligence may impose greater downside on the U.S. economy and equity market, given its services-heavy GDP and the composition of the S&P 500, compared with manufacturing- and resource-heavy EAFE and emerging-market indexes.
On the topic of flows, BofA reported that global equity funds attracted $38.1 billion in the week to Feb. 25. In the same period, cash funds drew $38 billion, bond funds took in $16.8 billion, gold funds saw $6.2 billion of inflows, and crypto funds recorded $300 million.
Regional fund movements showed continued interest in multiple markets. U.S. equity funds posted inflows for the fifth consecutive week, totaling $2.2 billion. Europe extended a four-week run of inflows, taking in $3.2 billion. Emerging markets led all regions with $15.4 billion of inflows, while Japan received $1.9 billion.
Sector- and country-specific flows included $2.2 billion of outflows from Financials - the largest weekly withdrawal since April 2025 - and $3.7 billion into Korean equity funds, which lifted year-to-date inflows to $21 billion, already the largest annual total on record.
These data points form the basis of BofA’s case for a gradual shift in market leadership. The strategists emphasize that regional composition, macro drivers, and sectoral sensitivity to technological change are central to how different equity markets may perform relative to the U.S. in the coming years.