A recent assessment of global equity performance reveals a concerning trend for the United States; the S&P 500 index is notably absent from the top rankings, failing to make the Top 10, Top 25, or even the Top 66 global indices for this year. This places it significantly behind other international indices, including those of Greece and Israel.
Despite the S&P 500 boasting an 11% rally to hit multiple records in 2025, it continues to trail behind established benchmarks such as Germany’s DAX and Japan’s Nikkei 225, as well as various markets in South Korea, Spain, and Ghana when considering dollar-denominated returns. The US dollar’s decline of 7.3% this year has played a pivotal role in shaping these dynamics, as it has boosted returns on foreign indices when measured in dollars. This drop has significantly contributed to the remarkable gains seen in markets like Colombia and Morocco, which have experienced increases of over 39%.
In local currency measurements, the S&P 500 struggles even more, ranking 57th, an alarming position given its standing as home to some of the world’s largest corporations, including tech giants and well-known consumer brands. Market analysts point out that this underperformance can be attributed to a shifting investment mindset among foreign investors, who are emphasizing companies within their home markets amid ongoing global trade tensions, exemplified by President Donald Trump’s renewed tariff threats against China.
The erosion of political and fiscal stability in the US has only heightened these concerns. With the government shutdown ongoing and fears that Trump’s fiscal policies could exacerbate the national deficit, investor confidence appears to be waning. This environment of uncertainty has driven down the dollar and has led to increased interest in gold as a safe haven, even as long-term Treasury yields remain elevated relative to past years.
According to Jasmine Duan, a senior investment strategist, the current landscape suggests that the deteriorating fiscal situation and increasing policy unpredictability in the US are prompting investors to explore non-US markets. Many projections of an impending rotation away from US equities in favor of international opportunities have gained traction recently.
Despite the S&P 500’s 11% growth this year, which has added around $6 trillion in market value, outperforming many other indices in recent years, global markets are positioned for continued success. This is particularly true as European interest rates are substantially lower than those in the US, providing companies access to more favorable financing conditions. Some European companies, like Rheinmetall AG, have capitalized on increasing government defense spending, significantly boosting their stock prices.
South Korea’s Kospi index has soared 50% this year, spurred by the new president’s push for shareholder-friendly reforms and advancements within the technology sector. Similarly, Japan’s prospects have brightened as expectations grow for pro-stimulus leadership, propelling its stock market to historic highs.
Conversely, concerns about inflated valuations within the S&P 500, where it trades at a significantly higher price-to-earnings ratio compared to global indices, have led many investors to seek diversification. Strategies focused on rebalancing portfolios to increase exposure in Europe, Asia, and emerging markets are becoming increasingly popular, according to Kristina Hooper, a chief market strategist.
A recent survey revealed that global investors are now net 14% underweight in US stocks while favoring European and emerging markets. This eagerness to diversify is further underscored by the concentration within the S&P 500, where just six stocks contribute to over 50% of the index’s gains this year. In contrast, a broader market measure that discounts these biases has shown only a modest increase of 5.6%.
As the landscape evolves, signs suggest that the momentum favoring US equities may be shifting, with investors increasingly identifying new opportunities beyond American markets. The current economic climate reinforces the notion that dependency on technology stocks may not sustain market growth as effectively in the upcoming years, prompting a reassessment of investment strategies across the globe.
