The latest earnings season revealed a notable shift in global equity markets as S&P 500 companies posted 13% profit growth, yet investors increasingly look beyond American shores. While US earnings exceeded expectations by five percentage points, the broader market response was tepid, with barely three-quarters of companies beating forecasts—the lowest rate in three years.

European and Asian markets showed stronger momentum, with the Stoxx 600 rising 7% and the MSCI Asia Pacific soaring 14.7% during the reporting period. Asia's technology sector benefited from its central role in AI infrastructure, with Taiwan Semiconductor Manufacturing Co. forecasting 30% revenue growth and planning up to $56 billion in capital spending for 2026. European industrials and financials delivered strong results, while consumer stocks continued to struggle.

Investment managers are increasingly advocating for international diversification. The valuation gap between US and European stocks is expected to narrow as earnings growth rates converge by 2027. Some managers see European industrials, defense, and banks as particularly attractive, describing the opportunity as a "structural re-rating story" rather than a defensive play. Meanwhile, US tech giants like Nvidia faced disappointment despite strong results, as sky-high expectations left little room for positive surprises.