Pimco's international investors are actively seeking to diversify their portfolios away from US markets, according to Christian Stracke, the company's president. This shift is motivated by ongoing geopolitical changes and the prolonged rally in US equities, which has led to increased exposure to the world's largest market. Clients are expressing a desire for investment options beyond the United States, including global fixed income, emerging markets, and various alternative assets.
This movement indicates a strategic realignment of capital, potentially moving away from US stocks towards regions like emerging markets, Europe, and other growth areas. Such a reallocation could put pressure on US equity valuations and influence the flow of foreign capital into American companies, thereby reshaping global portfolio construction. Pimco's guidance points to a strategic rebalancing towards regions that offer more stable growth prospects.
In 2025, global equity markets saw returns exceeding 22%, with markets outside the US, particularly emerging markets in Asia and parts of Europe, delivering higher returns than the US. Despite elevated headline equity valuations in 2026, Pimco identifies expanding opportunities across different regions, sectors, and investment styles. They advocate for a disciplined, systematic approach to identify new market leaders while avoiding overconcentration in a limited number of stocks. Their positioning for 2026 includes focusing on value opportunities beneath high US valuations, global diversification with an ex-US tilt, and alpha generation in the AI supply chain and high-quality sectors.
Other asset managers also emphasize the need for investors to reduce concentration in specific countries and assets, broaden their sources of return, and flexibly adjust portfolios given geopolitical uncertainties and evolving inflation pressures. The US share of global equity indexes has grown significantly, from about half two decades ago to over 60% today, prompting calls for rigorous examination of the dollar's and US Treasurys' safe-haven status. There's also an expectation for a more favorable environment for active management as performance gaps widen across countries and industries.
Emerging markets, especially in Asia, are seen as particularly promising. Pimco highlights potential in EM companies linked to the AI supply chain, such as top-tier Asian semiconductor suppliers, and in high-quality, defensive sectors like healthcare. The firm's systematic equity investing approach utilizes clear rules, data, and technology to identify opportunities across global markets, employing a multi-factor lens (momentum, growth, quality, value) and numerous proprietary alpha signals to build diversified portfolios with risk controls.
