After years of U.S. market dominance, 2025 is rewriting the rules of global investing. Are you ready for what’s next?
Discovering Opportunity in Change: Mid-2025 Market Trends
Navigating through the second quarter of 2025, dramatic changes are shaping both opportunities and challenges for investors. Here are the things that you should know about what’s changing:
The End of American Exceptionalism?
US markets have been at the forefront of discussion in international investing for the past few years. There was a prevailing “There Is No Alternative” (TINA) thesis, and rightly so. From late 2022 to early 2025, the MSCI World Index increased around 45%, while the MSCI World ex-US Index increased by around 28%. Going back further, to 2018, the disparity between those numbers looks even more dramatic: a 61% increase in the MSCI World Index vs merely 3% in the ex-US Index.
It was not mere exuberance in the marketplace. The earnings were painting the same compelling picture. MSCI World Index earnings since 2015 have risen by 80%, versus a mere 40% rise in markets elsewhere in the world. American tech companies and communication industries have been the best performers, with net profit expanding by a staggering 180% over a 12-year period—with 50 percent points of that 180% increase having come in a half-decade span from that point onward.
What Caused the American Boom?
Two main drivers were behind this outstanding U.S. performance:
- Massive Technology Spending: The “Magnificent Seven” technology giants along with Oracle significantly boosted their capital expenditures, especially on AI infrastructure. These cloud hyperscalers stepped up CapEx from around $40 billion in mid-2023 to around $70 billion in Q3 2024.
- Expanded Equity Holdings: Both foreign and domestic investors invested in U.S. equities. American individual equity ownership relative to financial assets grew from around 25% to 43%. Foreign investors, in turn, raised their weighting in U.S. equities from around 30% to 56% of U.S. financial assets.
The 2025 Turning Point
We entered 2025, and this American exceptionalism narrative was facing strong headwinds:
Human Capital Expenditure Slowdown
Although we continue to have a rosy long-run picture, we are currently experiencing our highest comparable periods ever. The rise of more affordable competitors like DeepSeek is also squeezing margins in the tech industry.
Government Expenditure Slowdown
After dramatically accelerating during 2022-2023, federal expenditures slowed during 2024. Base effects during the first three-quarters of 2025 continue to weigh on economic expansion.
Immigration-Driven Growth Reversal
And most importantly, the immigration surge that has driven recent economic growth has slowed dramatically. Between 2000 and 2021, net immigration totaled around 1 million annually on average. It surged to 2.7 million in 2022, 3.3 million in 2023, and 3.3 million again in 2024—stunning numbers that increased housing needs, tempered wages, and fueled aggregate earnings growth.
Throughout this time, employment from foreign-born workers increased by 3.5 million but native-born employment actually fell by 0.2 million. Net immigration, nevertheless, has fallen by 80-90% since January 2025, our estimates show.
Gazing Beyond American Borders
Meanwhile, other parts of the world are experiencing positive indicators. Europe, having suffered years of economic stagnation, now enjoys modest growth reacceleration fueled by mean reversion and military spending expansion. Germany’s index, DAX, has developed a bullish trend that appears durable.
The takeaway: For the first time in years, investors now have viable alternatives to American markets.
Managing Market Crosscurrents
To thrive in today’s markets, you have to understand that economic data are going to be highly unpredictable in coming months. A prime example would be disruption created by expected tariff fluctuations:
- Growth in imports (excluding gold) was 8.7% yoy during Q4, 2024 but increased to 21.4% during the first two months of 2025
- April Redbook Retail Sales surged 7.4% year-over-year, a record since late 2022
- Capital One’s latest earnings call reported a rise in consumer card purchases in April, specifically in electronics
These patterns strongly indicate that consumers have been front-loading purchases in anticipation of future price hikes. May and June, therefore, are expected to record a disproportionately high fall in consumption—leave a vacuum that makes economic forecasting even more difficult.
Investment Strategy in the New Landscape
Under these transition circumstances, your investment strategy needs to be guided by three essential fundamentals:
- Emphasize What Is Working: Take note of strong signals, not names that are widely known. European markets are presently presenting strong signs, along with gold investments that continue to be effective hedges against ambiguity.
- Cut Exposure to High-Beta Stocks: The top-performing equities of the recent bull run might have further to slide in a slowing economy. Reduce exposure to these highly fluctuating assets.
- Prioritize Preserving Capital: One of the most important concepts in this setting would be to steer clear of substantial losses. Keep in mind that we need to make not only successful investments, but avoid bad ones as well.
Discovering Opportunity in Change
Market shifts such as what we are going through right now can be discomfiting. They challenge conventions, making us reassess deep-seated assumptions. They also present incredible opportunities to investors who are prepared to change.
Oprah Winfrey was demoted from her news anchor position to daytime talk show in the early 1960s, ostensibly a calamitous reversal at first glance. What she found, though, was that this so-called stumbling block was actually leading her to her actual forte. By accepting change, as opposed to resisting, she constructed one of history’s greatest media empires.
Today’s marketplace gives us a parallel moment of inflection. The changing dynamics among U.S. and foreign markets are not something to dread—rather, a chance to realign, find new areas of growth, and position ourselves favorably for the next phase of the marketplace. Intelligent investors, such as Oprah, are going to find incredible opportunities during this shift—by keeping an eye on signals, not crowds.
