'Keith Moffat was born in Canada, lives in the Netherlands and has an Irish passport. But until recently, his stock portfolio was (almost) all-American. At one point, around 90% of Moffat’s investments were in U.S. stocks. He sold all of his American holdings in the past few weeks and piled into exchange-traded funds that hold shares of European and other international companies, alongside European defense stocks. Moffat said the U.S. market is overpriced. But President Trump’s rhetoric referring to Canada as the 51st state has also stung. “It was the dagger in the heart,” he said. “There are a lot of Europeans with money who are upset over what’s happening in the U.S. Why would we put our money there?” Just two months after JPMorgan Chase declared American exceptionalism “the broad and dominant” investing theme of 2025, ordinary investors across the world are looking elsewhere. Instead of riding the wave of U.S. outperformance, they are parsing the potential implications of tariff wars and major shifts in U.S. foreign policy. And for much of this volatile stretch, markets in China and Europe outpaced expectations.
The case for European stocks got a jolt Friday when the German government green-lit a plan to inject up to €1 trillion, equivalent to $1.09 trillion, into the nation’s economy, with much of the funds supporting the country’s defense efforts. Germany’s DAX index has shot up almost 15% this year, and some investors hope that heavy spending will pull the country out of its slump.

Countries across Europe are ramping up domestic military spending as the U.S. signals an increasingly isolationist foreign policy position. As a result, shares of the region’s defense companies are booming.

Lia Holmgren, a Miami-based trader from Slovakia who co-founded Trading Mindset & Data and coaches novice investors on social media, said that Europe was “pretty much sleeping” for years. But the DAX and European banks have recently shown signs of promise, she said, adding that Trump’s America-first agenda will force European businesses to become more aggressive. In February, Holmgren shifted some of her shorter-term assets away from the U.S. and into European defense companies. “Everyone invests in U.S. stocks,” Holmgren said. “It is the greatest companies in the world. But the valuations are insane. What is the future of those companies? Can Nvidia go 10x again? And that is why people, I think, are escaping to other places.”

In the first two months of the year, investors added more than $2 billion more than they pulled from U.S.-based exchange-traded funds that invest predominantly in European stocks, according to Morningstar. That marks a sharp reversal from the second half of 2024, when over $8.5 billion leaked from those same funds. Meanwhile, the pace of flows into U.S. equity ETFs was slower in the first two months of 2025 than in the last two months of 2024.

So far this year, the S&P 500 lost 3.6%, while the Europe Stoxx 600 gained 8.3%.

Investors will get another read on U.S. economic conditions this week, with fresh data on producer prices, orders on durable goods and new home sales, and the latest survey on consumer confidence. Die-hard investors in U.S. stocks still believe in the fundamentals: that domestic companies have strong outlooks and are poised to dominate global markets in the long run, with the growth of artificial intelligence as a major tailwind.

But they have noted the cracks, too: Consumer confidence is plummeting; inflation remains stubborn; and consumers are pulling back on all sorts of purchases. Some worry that keeping all of their eggs in an American basket might no longer be the way to go. '

WSJ

Chinas economy now dominates trade globally.

Trump is fighting a rearguard battle to retain as much US hegemony as possible as US empire viability is in terminal decline.