International equities capture 78% of equity inflows while the US stagnates at $771 million

Source: Yellow Original Title: International equities capture 78% of equity inflows while U.S. stalls at $771 million

Original Link: https://yellow.com/es/news/las-acciones-internacionales-capturan-el-78-de-las-entradas-de-renta-variable-mientras-ee-uu-se-estanca-en-771-millones-de-ddollars International equities attracted approximately 50 times more capital than U.S. equities in the first weeks of 2026, according to Bank of America flow data tracking developed market funds.

The shift away from U.S. stocks occurred as institutional investors redirected capital toward European and Asian markets.

Developed market equity funds recorded $50 billion in net inflows so far in 2026 through the end of January. International stocks captured $39 billion of that total, representing 78% of all flows. U.S. equities only received $771 million during the same period.

European equity funds absorbed $5 billion, while Japanese stocks attracted $2 billion. The flow concentration outside U.S. markets reversed years of U.S. equity dominance that characterized the post-pandemic bull market.

The Rotation Pattern

U.S. stocks experienced their largest weekly outflow since February 2025 during the first week of January, with redemptions of $18.9 billion according to EPFR data.

Technology sector funds experienced their third consecutive weekly outflow as investors questioned AI monetization timelines.

Charles Schwab’s research identified favorable dynamics driving international equity performance. Europe benefited from interest rate cuts by central banks and increased fiscal spending in countries like Germany.

International developed market stocks outperformed U.S. markets for most of 2025.

Currency dynamics played an important role. A weaker dollar outlook for 2026 tends to boost returns for U.S. investors holding international equities. Expectations of rate cuts by the Federal Reserve and concerns over central bank independence pressured the dollar.

Valuation Gaps and Earnings Growth

International stocks are trading at attractive valuations compared to U.S. equities, particularly relative to the forward P/E ratio of 22 times for the S&P 500.

Company earnings in developed international markets are expected to accelerate in 2026 at competitive rates with S&P 500 expectations.

Bank of America warned in January that large U.S. tech giants face a “priced-in perfection” environment in their stock prices. The firm estimated that over $500 billion in potential shareholder returns would be diverted to AI capital expenditures in 2026, removing a significant support for stock prices.

Equity market rotation occurs as geopolitical realignment reshapes capital flows and trade patterns. A Bloomberg analysis identified defense, energy security, and infrastructure sectors as beneficiaries of sustained capital spending as supply chains are restructured.