European investors are already showing signs of souring on US stocks against the backdrop of Trump’s trade wars and concerns about the strength of the US economy. This shift comes amid a reversal of fortune in 2025, with US stocks slumping and European shares rallying.

This potential change of direction is already evident in weekly ETF flows, which if sustained would represent a dramatic change from 2024, when European investors chased high-performing US stocks. From Feb. 14 until the week ending March 14, European investors withdrew EUR 2.852 billion ($3.079 billion) from US equity ETFs while shifting EUR 14.614 billion ($15.779 billion) to European equity ETFs.

In 2024, Europe ETF strategies took in EUR 11.9 billion ($12.9 billion), while EUR 99.9 billion ($107.9 billion) poured into US equity ETFs.

The ETF data is a good indicator of recent trends, but the full fund data for March (which includes overall numbers for all fund types) for is not available yet. Morningstar Direct data from February shows where investor money went and how that compared with January.

Looking at the fund flow data for February, two Morningstar categories received the lion’s share of investor money: Europe large-cap blend equity and eurozone large-cap equity.

Long-Term Fund Flow Trends: US Equities Dominate

The longer-term trend is obvious: Investors have preferred US equities to European equities. This can be clearly seen by monthly flow data for the European large-cap blend equity and US large-cap blend equity categories, where most assets are concentrated.

European Stocks Gain Momentum: the Key Drivers

This change comes amid better relative stock market performance in Europe compared with the United States. From the beginning of the year until March 20, the Morningstar Europe Index has risen by 9.0% in euros, compared with a fall of 8.1% for the Morningstar US Market Index, with the American market even falling into a correction (a 10% decline from its peak).

There are other factors supporting this potential shift. One is relative valuation—the sharp rise in the US market over the last two years has made it more expensive compared withEurope. More recently, the fall in the US stock market and the rise in European stock markets means this valuation differential has narrowed substantially.

Monetary policy has also played an important role. While the Federal Reserve has held back expectations of aggressive rate cuts due to the strength of the US economy, the European Central Bank has maintained a more accommodative stance, which has favored European markets.

Finally, Germany has made a radical shift in its fiscal policy with an ambitious infrastructure investment plan and eliminated its debt brake, marking the end of austerity, which could boost GDP growth and strengthen the old continent’s stock markets.