Global financial markets move in different directions while U.S. equities approach record highs

As the U.S. Federal Reserve prepared for an expected rate reduction, American stocks continued their ascent during early trading, notching all-time highs, while global stock markets began to display differing trajectories. Overseas equities, particularly those in Europe and China, surpassed U.S. market performance in the initial months of 2025. This shift was propelled by a mix of geopolitical calm and positive economic signals from key regions around the world. By February 19, the

All World ex U.S. index had climbed 7.2%, compared to a 4.5% gain for the S&P 500.

February saw Europe’s DAX index reach new records, supported by confidence in continued aid for Ukraine and robust activity in the defense sector. China’s stock market also rebounded, helped largely by rising technology shares. Despite ongoing worries about trade policy and local economic headwinds, investors have shown little concern over the region’s recent political and economic events.

International equities have historically gone through cycles where they outperform U.S. stocks. The most recent instance was in the early 2000s, as China’s economic expansion helped global markets recover from the dot-com bubble and the 2008 financial crisis. Meanwhile, U.S. equities were more affected by their own technology sector dynamics. The latest rally in international markets may indicate a change in investor perspective, with many now viewing global stocks as offering better value than the relatively expensive U.S. market.

Goldman Sachs’ latest analysis highlights the intricate nature of the global economy following the 2024 U.S. election. The company pointed out that Trump’s proposed policies—such as tax reductions, deregulation, and protectionist trade moves—could have varied impacts on worldwide growth. While a more business-oriented approach might lift U.S. stocks, markets outside the U.S., especially in Europe and China, could encounter challenges from increased trade friction and possible countermeasures.

expects China’s real GDP to grow by 4.7% in 2025, provided the government maintains its support through fiscal and monetary policy.

Looking forward, U.S. equities seem poised for a period of continued expansion, driven by healthy corporate profits, potential policy easing, and supportive fiscal conditions. Nevertheless, the growing gap between global market performances brings up questions about how sustainable these patterns are. The S&P 500’s gains have often come from a small group of large technology firms, whereas international stocks present a wider variety of investment opportunities. This has sparked more interest in global markets, notably in fast-growing countries like India and China, where demographic and technological factors are expected to fuel long-term growth.

Experts also stress the influence of underlying factors such as differing monetary policies and geopolitical shifts on stock market results. The strength of the U.S. dollar continues to play a significant role, as changes in trade direction and inflation pressures worldwide affect currency values. In this setting, the approaching Fed rate cut is anticipated to further boost U.S. stocks, though it may also introduce more volatility to international exchanges.