World Markets Have Outrun Wall Street by a Decent Margin

The stock market has treated US investors well this year, with the benchmark S&P 500 up about 17%. But the Financial Times reports something of a surprise: World markets have done significantly better. The MSCI ex-US index, which excludes American companies from its basket of international stocks, is up 29%—the biggest performance gap since 2009. A number of factors appear to be at play, including sky-high US tech valuations, related fears of an AI bubble, and concerns over President Trump's tariff wars, explains Axios.

"US equities are more expensive than lots of other equities, the growth trajectory is likely to be challenged, and everyone's got lots of them," Matthew Beesley of Jupiter Asset Management explains. His current diversification mantra on stocks is "anything but America." Investors have instead piled into long-neglected markets in China, Japan, Europe, and emerging economies, helped by a weaker dollar. China's main index has climbed 29% and Hong Kong's Hang Seng almost 28%. South Korea's Kospi has jumped more than 75%, driven by sharp rallies in tech firms Samsung and SK Hynix.

Another factor is a fear that the Chinese start-up AI DeepSeek—which unveiled a large language model seen as a credible, cheaper rival to leading US AI systems—will challenge American dominance in the field. "The reason we lost that exuberance [about US stocks] was really … 'DeepSeek day,'" says Helen Jewell of BlackRock, referring to the day of the product's launch. "You had that sudden realization that 'too overweight the US' was not the way to build a portfolio."