Full circle

2025 started as a year where investors decided that it was time to rotate into international markets, both developed and Emerging. Headlines like “the end of U.S. exceptionalism” where being published as the US trailed other markets. And It still does. As of yesterday, European indices have produced 3X the returns of the S&P500 or Nasdaq, but the story is starting to turn again. The chart below shows financial analysts net upgrades on stocks in different regions/markets; it tells us how bullish analysts are in each market, and since it is in percentage terms, we can compare among them. It clearly shows that the only market with positive net upgrades is the U.S. the rest have net downgrades or balanced expectations. It is a volatile indicator, and it will rotate again, but right now, after a few months of tariffs, analysts feel positive about their effect on corporate margins, that the worst is behind us, and that it’s time to relocate capital into the US. But how about valuations? You can have upside revisions, but the price you pay may be outrageous; how about concentration? What if those revisions are severely skewed to the tech sector? Does it make sense to come back to the U.S. in the current context?

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