Time to reconsider international stocks?

In a surprising turnabout, in the first quarter of 2025, European and Chinese equities have outpaced U.S. equities. What could that mean for your portfolio?

 

2025 CONTINUES TO SURPRISE INVESTORS. Case in point: European and Chinese equity markets are on track to outperform the S&P 500 in the first quarter by the widest margin in decades.1 Meanwhile, forecasts for economic growth in the U.S. have been lowered for 2025.2

 

This apparent shift in fortunes is being driven by a number of factors, among them: China’s tech sector has gotten a boost from its recent advances in artificial intelligence. In Europe, the Euro is rallying against the dollar, and the prospect of an end to the brutal war in Ukraine could lead to a period of post-conflict reconstruction.

 

“Europe’s resurgence is good news for corporate America, given the U.S.’s strong commercial ties with the continent,” says Joe Quinlan, head of Market Strategy in the Chief Investment Office (CIO) for Merrill and Bank of America Private Bank. “Against this backdrop, U.S. investors should consider investing in both U.S. large-cap firms with exposure to Europe and European equities themselves.”

 

In the video above, Quinlan sits down with Chris Hyzy, the CIO’s Chief Investment Officer, to discuss a range of potential international investment opportunities, as well as the possible impact of tariffs on future global growth. “The international markets can no longer be considered just an afterthought,” says Hyzy. Still, he believes, “it’s important to keep in mind that the U.S. remains a powerful long-term growth story.”

 

For more perspectives from Quinlan on European vs. U.S. equities, read “Might European exceptionalism sustain U.S. exceptionalism?” Tune in regularly to the CIO's Market Update audiocast series for latest insights on the markets.

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1Merrill and Bank of America Private Bank, “Capital Market Outlook,” March 10, 2025.

2CNBC Television, “Powell on the Fed downgrading its outlook for economic growth to 1.7% down from 2.1%,” March 19, 2025.

 

Important disclosures

The opinions expressed are as of 3/24/2025 and are subject to change.

 

Investing involves risk, including the possible loss of principal. Past performance is no guarantee of future results.

 

Some of the risks involved with equity securities include the possibility that the value of the stocks may fluctuate in response to events specific to the companies or markets, as well as economic, political or social events in the U.S. or abroad.

 

Investments in foreign securities (including ADRs) involve special risks, including foreign currency risk and the possibility of substantial volatility due to adverse political, economic or other developments. These risks are magnified for investments made in emerging markets.

 

The Chief Investment Office (CIO) provides thought leadership on wealth management, investment strategy and global markets; portfolio management solutions; due diligence; and solutions oversight and data analytics. CIO viewpoints are developed for Bank of America Private Bank, a division of Bank of America, N.A., (“Bank of America”) and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S” or “Merrill”), a registered broker-dealer, registered investment adviser and a wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).

 

BofA Global Research is research produced by BofA Securities, Inc. (“BofAS”) and/or one or more of its affiliates. BofAS is a registered broker-dealer, Member SIPC and wholly owned subsidiary of Bank of America Corporation (“BofA Corp.”).

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