Are investors rotating away from the US stock market? – 2 fund ideas to benefit

In recent years, global stock markets have become increasingly concentrated – at a country, sector and individual stock level.

A handful of mega-cap US technology companies – dubbed the ‘Magnificent Seven’ – dominated returns, raising concerns around diversification.

But is concentration risk now falling?

This article isn’t personal advice. If you're not sure if a course of action is right for you, ask for financial advice. Remember, all investments can rise and fall in value, so you could get back less than you invest. Past performance also isn’t a guide to the future.

What’s moved stock markets this year?

Trade tariffs, defence spending, and other geopolitical risks have played a key part in how markets performed in the first half of this year.

While global stock markets have been volatile, gains have been spread more widely and not isolated to the same handful of names that previously led the market.

These moves haven’t been enough to knock the tech giants off their top spot in global indices (or benchmarks) yet, and more recently they’ve performed well again. But it’s a stark reminder of the need for diversification in an investment portfolio.

At the end of June 2025, the US represented two-thirds of the MSCI AC World Index. This compares with almost 70% at the start of this year. It might not sound like a huge difference, but it’s a notable change.

It’s partly because US shares fell 2.82% in the first half of this year, while other markets have gained. Most noticeably, the European stock market has grown over 14.26% so far in 2025.

Areas including defence, banks and other industrials, including construction, have performed well.

The potential for more investment from Europe in areas like defence, following Trump’s calls for greater spending in this sector, and infrastructure has been viewed positively.

The UK’s also up an impressive 9.09% this year.

Sectors like aerospace & defence (including BAE Systems and Rolls Royce) have performed strongly here too, while banks have also boosted returns as they’re benefiting from higher interest rates.

Chancellor Rachel Reeves has also announced reforms which aim to increase investment in the stock market and drive growth across the UK.

In emerging markets, China had a strong first half.

The country’s leading tech players, including Alibaba and Tencent, surged on strong artificial intelligence momentum earlier in the year, while looser monetary policy from China’s government has given a boost to its stock market.

None of this is to say that concentration risk has disappeared.

The US, and technology companies in particular, remain dominant and the Magnificent Seven still carries substantial influence in global markets.

But recent data suggests there’s been some rotation in markets, towards some more economically sensitive sectors, value-oriented regions, and companies outside the usual tech titans.

This could present interesting opportunities for active investors to improve diversification outside of the index heavyweights we’ve grown accustomed to in recent years.

There are no guarantees this will be a full regime change. Many of the investment experts we meet don’t believe ‘US exceptionalism’ is over – it remains a highly innovative market. But the breadth of potential returns could be expanding.

As always, we suggest investors maintain diversified portfolios, given different countries, themes and styles of investing will come in and out of favour over time.

Looking for exciting investment ideas outside of the US?

Here are two fund ideas for investors seeking diversified and active exposure away from some of the global stocks market’s biggest constituents.

Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

For more details on each fund and its risks, use the links to their factsheets and key investor information.

Artemis Global Income

Lazard Global Equity Franchise