The appeal of the "America First" concept is diminishing as challenges from artificial intelligence and policy uncertainties persist. The U.S. economy's heavy reliance on technology and services, combined with the Trump administration's unpredictable trade policies, has complicated long-term business planning and contributed to a shift in investment preferences—rotating toward non-U.S. stock markets. Investors are increasingly drawn to European and Asian markets, where company valuations are lower but profit growth prospects are comparable to those in the United States. Some strategists suggest that a structural revaluation story is only just beginning.

While the S&P 500 hovered near historic highs in February, with sell-offs quickly met by bargain hunting, the index ended the period largely unchanged. In contrast, overseas markets demonstrated stronger performance. The MSCI World Index ex-U.S. rose nearly 5%, outperforming the U.S. benchmark and marking its largest margin of outperformance since the depths of the 2009 financial crisis. So far in 2026, U.S. equities have lagged behind global markets by more than 9 percentage points. Last year, international stocks outperformed U.S. stocks by 12 percentage points, the widest margin since 1993. Despite heightened Middle East tensions disrupting markets globally, this trend appears set to continue.

UBS strategists have downgraded U.S. equities to neutral—a move that, while not inherently negative, is notable for a market home to many of the world’s most valuable companies. Investor inflows have also slowed; according to Bank of America data, only $26 out of every $100 flowing into equity funds this year have gone to U.S. stocks.

The reasons behind this shift are long-standing. The U.S. economy’s heavy tilt toward technology and services makes it particularly vulnerable to disruptions from AI tools. The Trump administration’s erratic trade policies have further complicated long-term corporate planning. Many investors also believe that after an extended period of U.S. market leadership, new leaders are due to emerge. In recent weeks, this view has gained traction as investors observe that companies in Europe and Asia trade at lower valuations than their U.S. counterparts while offering similar earnings growth prospects.

Alessandro Valentini, a managing director and fundamental portfolio manager at Causeway Capital Management, noted, “Our interpretation is straightforward: the equity risk premium in the U.S. is near zero. Outside the U.S., it is higher, meaning investors are better compensated for taking risk. This is critical, especially after the volatility we saw in 2025.”

U.S. markets have experienced significant turbulence this year. The CBOE Volatility Index (VIX) has repeatedly surpassed 20, while realized volatility reached its highest level since last November, with intraday swings widening. Much of this instability stems from so-called “AI panic trades,” which have repeatedly affected various market sectors in February. Additionally, the Trump administration’s deep involvement in industrial and commercial policy—at times picking winners in ways inconsistent with capitalist norms—has added to uncertainty. The Supreme Court’s rejection of much of the president’s tariff plan has further confused businesses and consumers.

The White House has already implemented a 10% global tariff and is preparing to raise it to 15%, though without congressional approval these measures can only last 150 days—an unlikely scenario before the midterm elections in November. Gina Martin Adams, chief market strategist at HB Wealth Management, commented, “This could continue to support stronger performance in non-U.S. assets. Policy volatility challenges the assumption that the U.S. will remain the most investor- and business-friendly market, so capital may keep diversifying into more stable global regions.”

Data from Bank of America supports this view. Chief investment strategist Michael Hartnett noted that U.S. equities have been less popular than international peers for over five years. This does not entirely negate the U.S. market’s appeal, but it does suggest it is no longer as exceptional as it once was.

Aniket Shah, global head of sustainability and transitional strategy at Jefferies Group, suggested that U.S. policy instability has become a long-term positive for other regions. “The U.S. policy environment has certainly become less predictable. Investors are asking: Do I really need to keep 80% of my assets in a country with such policy uncertainty? Perhaps not,” he said.

According to Adrian Helfert, chief investment officer of Westwood’s multi-asset strategies, European equities—particularly in industrials, defense, and banking—are especially attractive. Increased government spending on infrastructure, energy projects, and military equipment in Europe should benefit these sectors. Helfert added that financial firms in the region are also poised to gain. “This isn’t a ‘hide from the storm’ trade, but a story of structural revaluation that is still in its early stages,” he said.

Even after February’s dip, the S&P 500 remains less than 2% below its all-time high, with a forward price-to-earnings ratio above 20—still elevated compared to other regions. At the same time, 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, observed, “U.S. market valuations remain higher than those in Europe, so the valuation argument persists.” She added that Europe “has more positive news flow, while the U.S. may face greater uncertainty.”

A weaker U.S. dollar could also benefit emerging markets. Jung In Yun, CEO of Fibonacci Asset Management Global in Singapore, said, “If these dynamics lead to a structural dollar weakening, the case for geographic diversification becomes even stronger. In such an environment, it is increasingly likely that crowded U.S. positions will see profit-taking, with capital gradually rotating into other equity markets and liquidity spreading beyond big tech into a broader range of sectors.”