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Every stock price ultimately rests on two pillars: Earnings and a story to believe in. For much of the past 15 years, the most compelling story in global markets has been unmistakably American.
Artificial intelligence, cloud computing, social media, advanced semiconductors, biotech discoveries, modular nuclear plants and quantum computing — all these growth narratives of the modern era have been led by U.S. companies and financed through U.S. capital markets.
As global investors chased that story, capital flowed disproportionately into American stocks, lifting prices and valuations along the way. These capital flows have made the U.S. stock market more reliant on a single story: That a handful of mega-cap tech companies can keep the market running.
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That long U.S. boom has rewarded investors who stayed close to home. But it has also introduced a different risk: Concentration in one country, one currency and a relatively narrow group of sectors.
Today, much of the U.S. growth and AI story is already reflected in stock prices, while many international markets continue to trade at meaningful discounts. That makes this a sensible moment to give the rest of the world another look.
The international comeback year many investors missed
For much of the past decade, U.S. investors hardly needed a passport. Large-cap American stocks, particularly technology, delivered exceptional returns, making international diversification feel unnecessary, even counterproductive. After a decade, in 2025, market leadership began to broaden:
|
Market region |
2025 total return |
|---|---|
|
Eurozone Equities |
41.3% |
|
Germany (DAX) |
37.1% |
|
United Kingdom (FTSE) |
35.1% |
|
Emerging Markets |
34.4% |
|
China |
34.1% |
Source: JP Morgan Guide to Markets, January 2, 2026. Past performance does not guarantee future results.
The question is not whether this shift will continue uninterrupted (no one can know that), but whether the balance of risks and opportunities has changed enough to warrant a reassessment. Several forces suggest it may be time for U.S. investors to renew their investing passport and venture abroad:
1. International stock valuations are generally more attractive than U.S.
After years of outperformance, U.S. stocks trade at elevated valuations relative to both their own history and to most foreign markets. The S&P 500 currently trades at a forward price-to-earnings multiple in the low 20s.
By comparison, many developed-market and emerging-market indexes trade at noticeably lower multiples and, in many cases, offer higher dividend yields.
Valuations are not reliable short-term timing tools. But over longer periods, starting valuations have historically played an important role in shaping returns. The valuation gap today is wide enough that long-term investors may find it difficult to ignore.
2. A softer dollar could turn into a tailwind
Currency trends have been an underappreciated contributor to U.S. outperformance. A strong dollar over much of the past decade boosted dollar-denominated assets and reduced the appeal of foreign stocks when returns were translated back into U.S. currency.
That dynamic has begun to ease. Historically, periods of dollar weakness have often coincided with stronger relative performance from international equities, as currency movements amplify local-market gains for U.S. investors.
Currency moves are notoriously hard to predict, but even modest shifts can change the relative math of global investing.
3. U.S. market dominance is historically extreme
The United States now accounts for more than 60% of global equity market capitalization, roughly double its share in the late 1980s. Within the U.S. market itself, concentration is also unusually high: The 10 largest companies in the S&P 500 account for about 40% of S&P 500 market capitalization.
The other 490 S&P 500 account for only 60%. This concentration indicates the US equity market’s dependence on earnings growth and AI excitement.
The dominance of today’s largest U.S. companies reflects real and unique strengths. Yet it has pushed many portfolios into levels of concentration investors may not fully appreciate.
By the end of 2025, only one of the 10 largest U.S. companies — Microsoft — had held that position a decade earlier. The other nine were far smaller players at the time.
History offers a consistent lesson: Market leadership rarely stays confined to one sector or one region forever, and extended periods of dominance are often followed by leadership emerging elsewhere.
4. Growth stories are re-emerging beyond U.S. technology
The next phase of global growth may be less narrowly focused than the last. In Europe, increased spending on defence, infrastructure and energy transition is supporting domestic demand.
U.S. companies remain at the forefront of innovation, particularly in AI. Over time, those AI investments could generate meaningful productivity gains and strong earnings growth. In the near term, however, high expectations and elevated valuations leave less room for disappointment.
What this means for investors
For most investors, the question is not whether to “bet” on international stocks, but whether their current allocation still reflects today’s risks and opportunities.
Strategic considerations for 2026
If you find that the equity part of your portfolio is 100% U.S. stocks, you aren’t just betting on America; you are ignoring the power of mean reversion. Here is how to strategically approach a rebalance to align your portfolio:
Review your target allocation. Global equity markets suggest that roughly 40% of investable value lies outside the U.S. While you may not want to go that high, moving from 0% to even 5% to 20% can add diversification and alter your risk profile.
The tax factor. Before selling highly appreciated U.S. winners to fund international buys, consult with a tax professional. In taxable accounts, a “cost-benefit analysis” is essential to ensure the tax bite doesn’t outweigh the diversification benefit.
Incremental rebalancing. Emotionally, it is hard to sell stocks that have done well and buy the ones that have lagged. You don’t have to move all at once. Consider a “staged” rebalance over three to 12 months to mitigate the risk of market volatility.
The bottom line
International investing involves unique risks, including geopolitical instability and differing regulatory standards. However, the greatest risk in 2026 may be concentration risk. The rest of the world is relatively less expensive, and its growth stories are becoming more diverse.
It is time to ensure your portfolio reflects the world as it is today, not as it was a decade ago.
Note: All data sources from JP Morgan, Guide to Markets, January 2, 2026.
