European investors have already shown sour signs of US stocks against Trump’s trade war and concerns about the strength of the US economy. This shift so far in 2025 has occurred amid a reversal of property in terms of performance, with US stocks collapsed and European stocks gathering.
Potential changes in this direction are already evident in weekly ETF flows. This, if sustained, represents a dramatic change since 2024, when European investors chased high-performance US stocks. From the week of February 14th to March 14th, European investors withdraw 2.852 billion euros from US stock ETFs and moved 1461.4 billion euros to European stock ETFs.
The chart below shows how the trend in US domination will reverse from the week of February 7th.
In 2024, the European ETF strategy won 119.1 billion euros, while 999 billion euros was poured into US stock ETFs.
Although early on, ETF data is a good indicator of recent trends, the full March fund data, including the total number of all fund types, is not yet available.
Monthly data from Morningstar Direct from February shows where investors’ money went and how it compares to January.
Looking at the full month fund flow data for February, two Morningstar categories received the Lion’s share of investors’ money.
Long-term Fund Floor Trend: US Stocks dominate
The long-term trends are clear. Investors prefer US stocks over European stocks. This can be clearly seen by monthly flow data to large cap blend equity in Europe and monthly flow data to the large cap blend equity category in the US, where most assets are concentrated.
European stocks gain momentum: major drivers
This shift in European investors’ preferences comes from the backdrop of improved stock market performance relative to the Old Continent markets when compared to the US. From the beginning of the year until March 20th, the Morningstar Europe index rose 9.0% in the Euro, but compared to an 8.1% decline in the Morningstar U.S. market, the US market has been further falls into a revision defined as a 10% reduction From the peak.
However, there are other factors that support this potential change.
One of these is a relative rating. The sharp rise in the US market over the past two years has made the US stock market more expensive than in Europe. Recently, a decline in the US stock market and an increase in the European stock market meant that this valuation gap has been significantly narrowed.
Furthermore, monetary policy has played an important role. The Federal Reserve has thwarted expectations of aggressive interest rate cuts due to the strength of the US economy, but the European Central Bank remains a more compassionate attitude that supports the European market.
Finally, Germany brought radical changes to fiscal policy with its ambitious infrastructure investment plan, eliminating the brakes on debt. This could mark the end of austerity, boost GDP growth and strengthen stock markets in the Old Continent.
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