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Why Smart Money Is Looking Abroad
Is U. S. dominance in stocks over? By Evan Simonoff
WHEN THE YEAR BEGAN, INVEStors were debating whether a 15-year run in which U. S. markets consistently outperformed foreign counterparts had reached an inflection point. In 2025, most bourses across the globe beat American stocks handily, and predictions that a reversal was at hand seemed long overdue.
Even before the United States-Iran conflict started, American stocks were facing serious headwinds. Fears about private credit problems collided with concerns that AI might render business models obsolete in profitable industries ranging from software to financial services. Foreign markets, meanwhile, were facing a period of consolidation after posting strong gains in 2025.
So the setup facing investors on February 28 when the Iranian incursion began was already fragile. Even though global equities swooned in the following weeks, many observers were struck by the muted market reaction.
The closure of the Strait of Hormuz, the world’ s biggest choke point for fossil fuels, quickly conveyed certain advantages to energy-independent nations like the United States. Oil and gas companies with little exposure to the Persian Gulf were among the most immediate beneficiaries of the conflict.
Yet once a tenuous ceasefire was declared and peace negotiations commenced in late March, markets in many corners of the world caught fire. There was no guarantee the economic damages wouldn’ t tip the global economy into a recession. But long-term investors were looking past the headlines. Value investors have found U. S. equities particularly chal- lenging after a 15-year bull market run, but real believers aren’ t discouraged.“ There is a significant valuation discrepancy” between U. S. and non-U. S. stocks, notes Robert Wyckoff, managing director at Tweedy Browne, adding that the notion“ value matters in a world of high inflation and interest rates” is gaining adherents.
Wyckoff maintains that valuation discrepancies are what drives much of Tweedy Browne’ s investing style.“ Over the long haul, the weight of high valuations will inure to the benefit of non-U. S. equities,” he says.
In Wyckoff’ s view, a reversal in international market momentum is likely. He points to data from Bloomberg and MSCI comparing 10-year rolling returns of the S & P 500 to the MSCI EAFE index dating back 56 years to December 31,1969. The S & P 500 beat the EAFE index in 58 % of those periods, but those figures are skewed by the outperformance of the S & P 500 over the last 15 years.
So far in 2026, the evidence supports this thesis. As of May 6, Japan’ s Nikkei index is up 21 %, Brazil’ s BOVESPA index is up 40 %, and South Korea’ s KOSPI has soared 75 %. This compares with 8 % for the S & P 500.
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