The global investment landscape has long been dominated by US equities, but signs suggest this trend might be shifting. Financial analysts are now evaluating whether international markets are poised for a period of stronger performance.
JPMorgan Chase analysts forecast that the MSCI EAFE index (tracking Europe, Australasia, Far East stocks) could soon outperform the US S&P 500. This would mark a significant change after over 15 years where the S&P 500 substantially led in returns compared to the international benchmark.
Potential Catalysts for Change
JPMorgan points to several factors potentially favouring EAFE equities. These include rising economic uncertainty and falling consumer confidence in the US, alongside inflationary pressures potentially exacerbated by tariffs under the current Trump administration. Geopolitical developments, such as any resolution in the Ukraine conflict, could also influence market dynamics. Furthermore, increased global competition in key sectors like Artificial Intelligence, exemplified by advancements from firms like China’s DeepSeek, is seen as impacting relative market valuations and challenging US tech dominance.
Long-Term Outlook
JPMorgan’s longer-term view supports this potential shift. Their capital market assumptions for the next 10 to 15 years project EAFE equities could yield returns approximately 1.4% higher than US stocks, forecasting around 8.1% for EAFE versus 6.7% for the S&P 500.
While US stocks have a strong track record, recent tech sector volatility and ongoing trade risks lend weight to the argument for diversifying into international markets like those represented by the EAFE index.
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