Investor's dilemma: which countries to invest in when taking money out of the US market

In recent months, the markets have been re-energized by the need to reallocate capital from the U.S. to international markets. But the US market is still the largest in the world. In this regard, the search for alternatives looks like a difficult task. Ask Askar Akhmedov, CFA, Chief Investment Officer of ATLAS Capital, tells us which countries an investor can look at.

Investors have been discussing the idea of diversifying and reducing the share of the US market in their portfolios for months. But in recent weeks, its relevance has increased dramatically.

The reason, in particular, was the statements of American President Donald Trump about the seizure of Greenland, the territory of Denmark, a NATO ally of the United States. In January, he also announced plans to impose additional duties on goods from eight European countries (they opposed the sale of Greenland to the States), but then canceled this decision. Now he threatens to impose 100 percent duties on exports from Canada, and on January 26 he announced that he would raise duties on goods from South Korea from 15 to 25 percent. In other words, the U.S. administration is now discussing restrictive measures against allies, not just geopolitical opponents.

In 2025, the strategy of investing more heavily in international equities versus U.S. equities actually performed well, especially in the first half of the year.

However, it would be simplistic to attribute this success solely to "capital flight" from America. The growth of international markets was influenced by a number of fundamental factors.

First, the European market was strongly supported by the industrial sector. Many European companies (including defense and industrial sectors) showed strong financial results due to the EU's plans to significantly increase defense spending and infrastructure upgrades. This created strong demand for the products of industrial corporations and supported their profitability.

Second, Europe's banking sector played a significant role in the markets' growth. The current interest rate structure remains favorable for banks, as the difference between lending rates and the cost of borrowing (deposits) remains high, which supports their net interest margins and profitability. This has a positive impact on financial performance and, consequently, on banks' share prices.

A separate factor worth noting is the weak dollar. The weakening of the U.S. currency - and over the past 12 months it has lost 11% against the six major currencies (according to the DXY index) - traditionally supports the prices of commodities produced in developing countries. And this has a direct impact on the share prices of commodity and mining companies. Good examples here are such issuers as KazMunaiGas, whose quotations rose by more than 55% over the year, and Kazatomprom, whose securities soared by 120% on the London Stock Exchange over the same period.

In addition, a weak dollar increases the dollar-denominated returns on international assets, making them more attractive to global investors.

This trend may continue in 2026, but the situation does not look clear-cut.

The strong performance of international markets last year was largely a consequence of their long lagging behind the US market. Investors noticed that many non-U.S. companies looked significantly cheaper on multiples compared to their U.S. counterparts. And the process of narrowing this gap has begun.

Also, the growth in a number of international markets has been largely derivative of U.S. technology trends.

This is particularly evident in South Korea, Taiwan and Japan. In these countries, technology and semiconductor companies, which are closely embedded in the global value chains of the American tech sector, occupy a significant share in stock indices. That is, they too have become beneficiaries of the artificial intelligence boom.

From Atlas Capital's perspective, key structural trends specific to the U.S. market, such as the development of AI, cybersecurity, fintech and the IPO market, will remain largely a U.S. story in the coming years. This is because many other countries are either underrepresented in these areas or lack a comparable ecosystem of capital, technology and human resources.

We do not expect US equities to rise significantly because the US market already remains expensive by historical standards. However, room for growth remains due to companies' earnings growth - both through margin expansion and revenue expansion.

That said, in 2026, it is possible that the markets of South Korea and Taiwan will once again perform outstandingly. The reason is simple: their stock markets are heavily concentrated in the technology sector, and more specifically in semiconductor companies, which continue to be the center of global investment attention.

An increase in US duties for South Korea could be a source of short-term volatility, but is unlikely to significantly change the long-term investment case. The country's key technology companies remain systemically important for the AI sector. And there, demand continues to exceed supply.

We believe the key beneficiaries in these markets will be semiconductor companies - they hold strategic positions in the global market for memory and components for AI infrastructure - and the overall technology sector.

This article was AI-translated and verified by a human editor