Why international stocks are starting to outpace the U.S.
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This week’s insights include: |
- How Q4 looked like globally: Global equities delivered strong returns in 2025, but the earnings picture underneath was more mixed. Trade tensions, political uncertainty, and central bank policy shifts created volatility, yet markets remained resilient.
- Deep dive into Q4 earnings across the U.S., Europe and Asia: U.S. tech companies continued to drive earnings growth while European markets delivered strong returns despite softer earnings surprises. In Asia, South Korea stood out as semiconductor giants powered the region’s performance.
- The big insight: International markets outperformed the U.S. in 2025 and early 2026 data suggests the trend may continue. Investors may increasingly revisit global allocations as the long-standing dominance of U.S. equities begins to face stronger competition.
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This week's Market Insights article is a 5 minute read! |
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The picture for earnings and equity performance last year looked good with the MSCI World delivering a gain of 21.6%. Under the surface however, the story is more complicated. In the U.S., the number of companies that actually contributed to earnings beats was disappointing. Just under three-quarters of companies in the S&P 500 surpassed forecasts. That’s the lowest share in three years and down from 82% last quarter. Europe was even weaker with only 47% of companies in the MSCI Europe beating expectations, well below the 54% five-year average. What does this fractured market mean for investors? Let’s dive into a review of Q4 2025 earnings to find out. |
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| "What’s hot today grows stale tomorrow, and back again." | |
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Here’s a quick summary of what’s been going on: |
- Middle East conflict triggers major global oil supply shock.
- Trump launches tariff probes targeting global trade practices.
- Oracle raises revenue outlook as AI demand drives cloud growth.
- Adobe posts record revenue as AI growth accelerates.
- Atlassian cuts 10% of staff, roughly 1,600 employees.
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| What Q4 Earnings signalled to investors |
2025 was great for returns but those gains tested investors’ resolve with many surprises to deal with. For one, trade worries rattled investors as bold new tariff policies were implemented throughout the year. As a result, last quarter was one of the most volatile seen in the year. Even after tariff worries subsided a bit, there were new concerns when the U.S. Federal Government shut down for 43 days in October and November. Despite this, markets continued to climb higher and by mid-November, Congress reached a deal to reopen the government. A lot of the support for strong global equity performance came from central banks that were willing to be accommodative. Many decided to lower their policy rate or hold steady. Here's a summary on how companies performed in each region in the world: |
- U.S.: Earnings growth remained solid but was heavily concentrated in tech, which led the S&P 500’s gains. While 73% of companies beat earnings estimates, that was below recent averages, and rising unemployment hinted at a cooling economic backdrop.
- Europe: European markets delivered strong returns in Q4, though earnings results were more uneven. Financials benefited from improving lending activity while defensive sectors like healthcare and utilities attracted investors seeking stability.
- Asia: Asia posted strong annual performance, led by South Korea’s tech-heavy market. Semiconductor leaders like Samsung and SK Hynix drove gains, while other regional markets saw mixed capital flows.
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Join the discussion by leaving a comment! |
We’ve shared three contrarian ideas, but what would you add to the list? |
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Monday Canada Inflation Rate YoY (Feb) Forecast: 2.1%, Previous: -2.3%
Why it matters: Inflation trending closer to the Bank of Canada’s target would strengthen expectations for rate cuts later in the year. |
Tuesday Australia RBA Interest Rate Decision Forecast: 3.85%%, Previous: 3.85%
Why it matters: With the last rate decision leading to a hike, next week’s decision is something investors will be watching closely. |
Thursday Fed Interest Rate Decision & Economic Projections Forecast: 3.75%%, Previous: 3.75%
Why it matters: This is the biggest event of the week. Investors will focus on the Fed’s outlook for inflation, growth, and the path of interest rates, which can quickly move global equity and bond markets. |
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