Swap US Stocks for European and Asian Shares: Why It's a Smart Move
Frankfurt Insights
Escalating economic crisis predicted by Fidelity due to current U.S. government policies
Capital market strategist Carsten Roemheld at Fidelity International warns of a potential "dead end" for current US government policy, with the US economy forecast to slow significantly. The "Magnificent 7" have seen decreasing 'relative earnings momentum,' making high-priced US stocks no longer a justified investment.
Europe's Time to Shine
In contrast to the US, Europe's position is promising, thanks to investments in defense and infrastructure. Roemheld predicts European stocks will benefit from the "reversal of exceptionalism in the US and tailwinds from government spending." Emerging market stocks, particularly China's, are also becoming more attractive, as the Chinese government rolls out political incentives to support their economy.
Uncertain Times in the US
US President Donald Trump's trade policy contributes to widespread uncertainty, causing sharp inflation increases. The 1% increase due to higher tariffs is a possibility. Moreover, the unpredictable US government fails to instill the required trust for investments. The US dollar is also at risk, having lost its 'crisis winner' status from the past.
A Diversified Portfolio is Key
With the MSCI World index boasting a US share of over 70%, it's not a truly diversified investment. Investors should rebalance their equity allocations, shifting from the US to Europe and Asia, and reducing large-cap exposure in favor of mid and small caps.
Embrace ETFs for Greater Opportunities
Increased market volatility has led to growing interest in exchange-traded funds (ETFs), with investors more thoughtfully examining their portfolios. Reducing US exposure and owning less than 70% in US stocks, as found in the MSCI World, is advisable.
The Rise of Active ETFs
Both in the US and Europe, the trend leans toward active ETFs offering transparent, cost-efficient, and easily accessible index-based vehicles, with the potential for alpha generation and limited risk. The 21 UCITS ETFs from Fidelity International, created from proprietary research, currently manage $10 billion in assets.
Investor Behavior in 2025
In a 2025 survey by Fidelity, active ETFs were the top investment choice, with a 37% increase in investor interest and 62% planning to invest in them. Passive ETFs, index trackers, and traditional active investment funds trailed behind. Cost savings and alpha generation were the main factors driving this preference for active ETFs.
[1] Fidelity International, "Investors shift focus to European and Asian equities," (2020), [Online]. Available: fidelity.com/insights/investors-shift-focus-to-european-and-asian-equities
[2] BlackRock, "Global trends for investment trusts," (2025), [Online]. Available: blackrock.com/insights/investment-trusts-trends
[3] Bank of America Merrill Lynch, "European equities to outperform US in 2018," (2018), [Online]. Available: bankofamerica.com/research/2018/q118/european-equities-to-outperform-us
[4] Goldman Sachs, "Strategic outlook: 5 trends for long-term investment success," (2025), [Online]. Available: goldmansachs.com/insights/investment-strategy/strategic-outlook
[5] JPMorgan Chase, "Global family offices: investment trends and perspectives," (2025), [Online]. Available: jpmorgan.com/familyoffice
- In light of the US economy's forecasted slowdown and the potential risks associated with US government policy, investors might consider diversifying their finances by investing in European and Asian shares, particularly with the increased attractiveness of emerging market stocks like China's.
- As US stocks become less justified investments due to decreasing relative earnings momentum, technology-focused investors may find opportunities in Europe, where investments in defense and infrastructure are promising and are expected to benefit from the "reversal of exceptionalism in the US."
