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RoW equities did far better than US equities CY25TD

ADMIN || 13th October 2025

If we check the rankings of the best performing equity indices globally, US equities are at no 66. It’s one of the worst relative performances since the global financial crisis for the US benchmark.

The underperformance is even more surprising given the S&P 500’s 11% rally to countless records in 2025. But it’s still trailing most developed market benchmarks like Germany’s DAX and Japan’s Nikkei 225, and lags behind gauges in South Korea, Spain and Ghana, when measured in dollars. The US currency has fallen 7.3% this year, helping to boost returns on foreign bourses in dollar terms.

But even in local-currency rankings, the S&P 500 comes in just 57th.

Trump’s flip flops in policy & continued attacks on institutions such as Fed has led to investors searching for local market winners in CY25TD.

But if we move back a little in time, US equities are also coming off of back-to-back years with gains north of 20%, easily outstripping the likes of the Euro Stoxx 50 and Nikkei 225. If one takes stock of performances since the end of 2022 to 2024, the S&P 500 ranks 10th.

But going forward US equities look expensive compared to German as well as Japanese equities. European interest rates are half the level in the US, giving corporates access to cheaper financing. Companies trade at valuations about 35% lower than in America.

Also going forward earnings growth are likely to converge globally.

The S&P 500’s stellar run from its April low has stretched valuations to levels that have raised alarm and prompted investors to diversify exposure. The index trades at 22 times forward earnings, a premium of 46% to the rest of the world. It’s also famously top-heavy, with mega-cap tech and its smaller names accounting for more than one-third of the index by weighting. A 53% rally in the two years starting at the end of 2022 had left foreign investors over-exposed to American equities.

Investors going forward are likely to diversify to Europe, Japan and other EMs. Global investors were a net 14% underweight US stocks in September, while being 15% overweight euro-zone peers and 27% overweight emerging markets.

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