Investors See the End of U.S. Stock Market Dominance, Shift Focus to Global Opportunities
Bank of America’s latest survey reveals a significant shift in investor sentiment, with global fund managers increasingly optimistic about international equities and less confident in U.S. stock performance. Conducted from June 6 to June 12, the survey highlights the evolving strategies of wealth advisors and RIAs seeking growth beyond domestic markets.
Optimism Toward International Equities
According to the survey, 54% of respondents identified international stocks as the top-performing asset class for the next five years, signaling a departure from the U.S.-centric investment strategies that have dominated in recent years. In contrast, only 23% of investors still see U.S. equities leading the charge, while 18% leaned toward alternative assets such as gold, government bonds, and corporate bonds.
This pivot reflects a growing awareness of opportunities in undervalued or emerging international markets, driven by favorable valuations, diversification benefits, and economic growth prospects outside the United States.
Trade Tensions Weigh on U.S. Markets
The diminishing confidence in U.S. markets coincides with ongoing geopolitical and economic uncertainties. President Donald Trump’s trade policies, particularly escalating tariffs, have created headwinds for American businesses and broader market sentiment.
Nearly half of respondents—47%—cited the potential for a global recession triggered by the trade war as the most significant "tail risk" to markets. This marked the third consecutive month that recession fears topped the list of investor concerns.
Other key risks highlighted by survey participants included:
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Federal Reserve tightening: Concerns over aggressive interest rate hikes to combat inflation.
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Rising bond yields: Fears of a credit event caused by a disorderly surge in yields, threatening debt markets and corporate balance sheets.
Sentiment Begins to Rebound
Despite these risks, investor sentiment has shown signs of recovery. Bank of America’s proprietary sentiment gauge—which considers factors such as growth expectations, cash holdings, and equity allocations—rose to 5.4 in June, the highest level since the unveiling of Trump’s tariff strategy in April.
Strategists described the current sentiment as approaching “Goldilocks bull” territory, characterized by a balanced mix of optimism and caution. Importantly, this suggests that while investors are positioning for potential headwinds, they remain engaged in markets and open to opportunities.
Soft Landing Expectations Rise
Encouragingly, 66% of surveyed investors now believe the global economy will achieve a soft landing, avoiding a full-blown recession over the next 12 months. This marks a substantial improvement from April, when only 37% expressed such optimism.
For wealth advisors and RIAs, this represents a critical shift in client expectations and portfolio planning. Advisors may need to balance client concerns about domestic risks with the opportunities presented by international diversification and alternative investments.
What This Means for Advisors
With international equities gaining favor, advisors have an opportunity to reassess asset allocation strategies and explore sectors and regions poised for growth. Emerging markets, European equities, and Asia-Pacific investments may offer compelling cases for inclusion in diversified portfolios.
At the same time, advisors should monitor U.S. policy developments and their ripple effects on global markets. Communicating these trends effectively can help clients understand the rationale for diversifying away from U.S. equities while maintaining exposure to potential domestic opportunities.
The global market landscape is shifting, and wealth advisors are uniquely positioned to guide clients through this transition. The challenge lies in balancing near-term risks with long-term growth opportunities in an increasingly interconnected and volatile investment environment.
