The past year has demonstrated how resilient global markets can be when structural forces counter short-term economic concerns. In the United States, growth remained steady despite tighter immigration, trade policy uncertainty, and a continued cost-of-living squeeze for middle-income households.
A defining market feature in 2025 was continued AI-driven corporate investment, supported by profitable, cash-heavy technology companies rather than speculative financing. Capital expenditures by major cloud and data-center providers reached record levels, accounting for over 1.2% of US GDP and fueling a global expansion in chip demand, infrastructure, and industrial capacity. This has created real revenue growth instead of the inflated expectations that characterized prior tech bubbles.
Outside the United States, international equity markets staged a decisive comeback. Europe, Japan, and segments of emerging markets outperformed US equities by over 1,520 basis points, an historic spread driven by favorable earnings surprises, undervaluation, a reversal of sentiment, and a weaker US dollar. Structural changes in Europe and Asia, such as stronger fiscal stimulus, corporate governance reforms, and the broadening of AI adoption, contributed to an earnings trajectory more aligned with US companies than in prior cycles.
Fixed-income markets also offered renewed value, supported by stable fundamentals in corporate balance sheets, improving municipal finances, and attractive real yields.
For alternative investments, 2025 was a year of expanded access and selective opportunity. Private markets benefitted from the AI infrastructure boom, while small- and mid-cap private equity saw improved exit prospects due to robust M&A and IPO pricing. Meanwhile, private credit delivered attractive yields despite isolated credit events.
Looking ahead to 2026 – Implications for cross border investors
For Americans living in Europe, the report’s key lessons translate into actionable strategies:
1. Global diversification Is a must
The outlook highlights that the earnings gap between US and international markets has narrowed, and overseas markets now benefit from AI adoption across semiconductor, robotics, and industrial sectors, record buybacks in Japan and Korea, and fiscal investment in European infrastructure and defense.
For Americans abroad, this directly supports greater allocation to local European and Asian markets, especially value-oriented sectors and beneficiaries of fiscal spending.
2. Bonds are back, but the strategy must be active
With US rates likely to remain range-bound and the Fed taking a cautious approach, fixed-income portfolios should focus on quality credit, global bonds for diversification, and inflation hedges, such as TIPS and real assets,
3. Tax-efficient asset allocation matters more for Americans in Europe
For US expats, global exposure via US -compliant structures can provide diversification without PFIC risk.. In summary, this means:
- Using US -domiciled ETFs to avoid PFIC penalties
- Leveraging tax-loss harvesting in US taxable accounts
- Aligning retirement contributions with bilateral treaty rules
- Avoiding non-US funds even if purchased locally
Conclusion: 2026 as a turning point for cross-border portfolios
We don’t believe that the coming year will not be defined by dramatic market swings, but by the need for deeper portfolio attention. Structural shifts are reshaping the global investment landscape, and Americans living in Europe could be positioned to benefit, if they avoid tax pitfalls and embrace tax-optimized, cross-border global diversification.
The era of US exceptionalism is evolving into a broader global opportunity. For disciplined, globally aware expat investors, 2026 could be the year to get “back onside” and capture the strength of multiple markets working in parallel.
