The case for global stocks over US equities is getting harder to ignore

• Emerging market earnings are forecast to grow around 17% annually through 2026, compared with roughly 12% for US markets, while international stocks trade at 15x forward earnings versus 22x for US equities.
• The ten largest US companies represent 36% of total US market capitalization, creating concentration risk, while AI-driven growth has spread globally with South Korea's Kospi surging 76% and Taiwan Semiconductor gaining 47% in 2025.
• The US dollar fell approximately 9% in 2025, its worst year since 2017, while China's yuan strengthened over 4% and Chinese equities rose 22%, marking the first coordinated stock-currency rally since 2017.

Summary: Global Stocks Outperforming US Equities

Key Performance Metrics:

Global stocks are significantly outperforming US markets. In 2025, the MSCI All Country World ex US index surged 29%, nearly double the S&P 500's 16% gain. Brazil led with 48.5% returns, followed by Canada (35.8%), with Germany and the UK close behind. This outperformance has continued into early 2026, with Japan, Brazil, and China leading major markets.

Valuation Disparities:

US stocks trade at approximately 22x forward earnings, compared to 15x for developed markets ex-US and 13x for emerging markets. The top 10 US companies represent 36% of total market capitalization, creating significant concentration risk. Over three-quarters of global equity fund inflows this decade have flowed into US assets despite the US generating less than half of global corporate earnings.

Earnings Growth Dynamics:

Emerging market earnings are projected to grow around 17% annually through 2026, versus 12% for the US market and 8% for the US equal-weight index. This represents a shift from US-concentrated growth to broader international profit expansion.

AI Investment Spreading Globally:

While AI-related companies accounted for over 50% of US market returns in 2025, the technology investment cycle has expanded globally. South Korea's Kospi jumped 76%, Japan's Nikkei rose 26%, Taiwan Semiconductor gained 47%, and Alibaba climbed 75%.

China's Resurgence:

Chinese equities in Hong Kong rose 22% in 2025, while the yuan strengthened over 4% against the dollar—the first coordinated rally since 2017. Forward valuations remain attractive at 11x earnings with mid-teens earnings growth forecasts.

Currency Impact:

The US dollar fell approximately 9% in 2025, its worst year since 2017, improving dollar-based returns for international investors and supporting capital reallocation away from US-concentrated positions.