It’s human nature to allow familiar patterns to guide our decision-making processes. But it’s just as important to recognize when changing conditions warrant a rethink. Return patterns in global equity markets appear to be shifting in ways that should prompt investors to revisit their allocations.
For the past 16 years, US stocks have dominated global returns (Display). Since 2010, US large-cap growth stocks have risen well above the pack, returning a cumulative 1,011%, as investors rewarded high-quality businesses and technological innovation. Returns across the US equity markets dwarfed those of European, Japanese and emerging-market stocks.
Markets Have Flipped in 16 Months
Recent return patterns look markedly different. In the 16 months since January 2025, emerging-market equities surged by 53.8%, followed by European stocks with a 42.2% gain. US stocks have been left behind.
Why have markets shifted? Investors are asking more questions about whether artificial intelligence (AI) will deliver the profitability required to justify the high prices of technology stocks. AI is also fuelling capital intensity, with massive spending on technology infrastructure. Geopolitical tensions have intensified supply chain weaknesses, as the Middle East conflict triggered higher energy prices with cascading effects through industries and economies.
Taken together, these trends have supported equity markets outside the US, as well as value stocks, which have more exposure to physical world industries such as industrials, materials and energy. These “shorter-duration” market segments offer investors more exposure to near-term visible cash flows and earnings.
Capturing a Broader Equity Opportunity Set
No one can say with certainty that this reversal will last. Indeed, US growth stocks posted a strong month in April, and still have an important role to play in long-term allocations. But when market leadership narrows for long enough, investors can easily become overexposed to yesterday’s winners. With valuations elevated and US market concentration still extreme, we believe this may be the right moment to rebalance toward a broader opportunity set that includes value equities as well as non-US developed markets and emerging markets.
