Global investors are finally looking beyond American markets for fresh opportunities. According to Citi analyst Beata Manthey, the shift is driven by expensive US equity valuations and improving earnings momentum abroad. The firm's latest global outlook expects international diversification to continue through 2026.

US stocks currently trade around 22 times forward earnings, leaving little margin for error if corporate profits disappoint. Meanwhile, Europe excluding the U.K. shows the sharpest earnings acceleration, jumping from just 1% growth last year to a projected 10% in 2026. Citi maintains Overweight ratings on Europe and emerging markets, forecasting roughly 10% upside for the MSCI AC World index by year-end.

The broader story reflects a market that's priced for perfection. With global equities trading near the 90th percentile of historical valuations, investors are betting that earnings growth—not multiple expansion—will drive returns. Citi favors financials, technology, and industrials, while keeping consumer sectors underweight as the rotation away from US mega-caps gains steam.