Bank of America strategist Michael Hartnett predicts international equities will outperform U.S. stocks through the second half of the 2020s. He argues a 'new world order = new world bull' is emerging, with the rest of the world (RoW) expected to gain share after years of U.S. dominance. Currently, RoW represents just 38% of the $97 trillion global stock market versus 62% for the U.S., a gap Hartnett's team expects to narrow significantly. Several factors drive this forecast, including fiscal excess, rising populism, and the 'end of deflation.' The strategists also contend that AI disruption could weigh more heavily on the U.S. economy and equity market than on international peers. They specifically note AI disruption is more 'labor market and/or corporate revenue negative to services-heavy U.S. GDP & SPX index than manufacturing/resource-heavy EAFE/EM macro & equity indices.'

Fund flows support the RoW narrative. In the week ending February 25th, global equity funds attracted $38.1 billion, while cash funds drew $38 billion and bond funds $16.8 billion. Regionally, U.S. equity funds saw $2.2 billion of inflows for a fifth consecutive week. Europe extended its run to four weeks with $3.2 billion, but emerging markets led with $15.4 billion of inflows, followed by Japan with $1.9 billion. Conversely, Financials recorded the largest outflow since April 2025 at $2.2 billion. This shifting capital suggests investors are increasingly favoring international exposure over U.S. assets.