As fears around the viability of the hot artificial intelligence trade spurred sharp declines in the Nasdaq Composite and the S & P 500 on Monday, it's interesting to note that U.S. markets are notably underperforming those of Europe. Even more interesting is that China's Shanghai Composite, is down 3% year to date, despite the nation's widely heralded advances with DeepSeek , the latest darling in the rapidly growing world of artificial intelligence. As U.S. investors await guidance from the Federal Reserve on the future direction of interest rate policy, as well as policy details from the Trump administration, European investors appear to be betting that the European Central Bank will be friendly. They also seem to be wagering that economic policies in Europe might well favor something of an economic renaissance over there. It is a contrarian play to be sure. Looking overseas for opportunities President Donald Trump has publicly proclaimed a new American "golden age," just as many assume Europe's secular stagnation will continue in perpetuity. I prefer market messages over public proclamations. France's CAC 40 index, and Germany's DAX index are both up about 7% in 2025. The Europe Stoxx 600 index has gained nearly 5% this year. .FCHI .SPX YTD mountain France's CAC 40 index vs. the S & P 500 in 2025 That compares to a roughly 3% advance year to date for the S & P 500, while the Nasdaq Composite is up 2%. The new investing year is starting off with a plate full of uncertainties in the U.S., while the gloom and doom over Europe's current condition is widely known and likely priced into their markets. It could be the right time, after the best two-year performance for U.S. stocks since 1997-1998, to shift some dry powder overseas. Europe could be prime for investing As always, I'd be careful with Asia and emerging markets, as their futures always appear bright but can disappoint — at least from an investment perspective. Europe, in the absence of a more solid relationship with the U.S., may finally be forced to reckon with its own fiscal cliff, slowing growth and dependence on our nation for its continental defense. That could mean right-sizing budgets, slashing interest rates and spending more on defense goods, all of which would be stimulative to European economies — assuming there is no massive trade war with the United States. None of this is to say that I am overtly bearish on U.S. markets. Having said that, Wall Street is richly valued by historic measures, Fed policy is less friendly than once hoped and multiple policies from the Trump administration hold a variety of potential adverse economic and market consequences. All of that leads me to assume a long-overdue market correction of 10% to 15% is in the making. A tactical shift of 10% of one's portfolio, tilting toward developed European markets, might be a decent hedge against near-term volatility here at home. These are thoughts for active traders – not for long-term investors who have been well-served by simply socking away money in U.S. markets for years. Tactical traders, on the other hand, look for short-to-intermediate opportunities to improve portfolio performance and to avoid near-term turbulence in domestic markets. As hard as it's been to be bullish on Europe and cautious on America, the contrarian play is just that. For all the concerns about how the U.S. will treat its allies going forward, some tough love may boost the fortunes of countries across the pond while we sit and ponder what's going on here at home. — CNBC contributor Ron Insana is CEO of iFi.AI, an artificial intelligence fintech firm.
