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Global Stocks Soar as Investors Shun U.S. Tech
5 Feb
Summary
- Global ex-U.S. equity funds attracted $15.4 billion in January.
- U.S. macro risks and a weaker dollar drive foreign investment.
- Ex-U.S. markets offer lower valuations and cyclical stock exposure.
Global equity funds excluding those focused on the United States experienced substantial inflows totaling $15.4 billion in January, marking a four-and-a-half-year high. This surge in investment reflects a strategic shift by investors moving away from predominantly U.S. technology stocks, which currently face pressure due to the rising costs associated with artificial intelligence investments.
The rotation into international markets is propelled by several factors, including perceived U.S. macroeconomic risks and a declining U.S. dollar. Analysts point to attractive opportunities in ex-U.S. markets, citing China's growth and yield potential, and Europe's anticipated benefits from increased defense and fiscal spending. These markets also present a more favorable valuation landscape compared to the U.S.
The MSCI World ex USA Index has demonstrated stronger performance year-to-date, outperforming the S&P 500. Experts anticipate global equities could rise by approximately 10% by year-end, suggesting that investors holding concentrated U.S. positions stand to benefit from diversification. The persistence of favorable currency dynamics and interest rate expectations further supports the view that this market rotation could have lasting impact.
