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US stocks have been eclipsed by market gains in the rest of the world in 2025, as concerns about high valuations, Chinese artificial intelligence success and Donald Trump’s radical economic policies have contributed to a rare year of underperformance for Wall Street.
The S&P 500 was up 17 percent this year as of Monday afternoon, outpacing a 29 percent gain for the MSCI All Country World ex-US index by the largest margin since the global financial crisis in 2009.
Wall Street’s surge in artificial intelligence has helped it recover from the selloff caused by Trump’s “Emancipation Day” tariff attack in April.
But concerns over the lingering effects of the president’s trade war, as well as skyrocketing US tech valuations, have led many investors to question the long-held dominant position of US stocks in global portfolios.
Matthew Beasley, chief executive of Jupiter Asset Management, described his outlook for equity investing in 2026 as “anything but US,” saying, “US equities are more expensive than many other equities, the growth path may be challenged, and everyone has a lot to offer.”
“It’s a very good time to think about anything (investors) haven’t got a lot of,” he said.
Indices for China, Japan, Germany and the UK outperformed the S&P as relatively less-loved markets bounced back, while the MSCI gauge of emerging markets climbed nearly 30 percent on a weaker dollar.
“There is a need to diversify risk,” said Niamh Brodie-Machura, chief investment officer of equities at Fidelity International. “Many of the investors I talk to are examining their geographic allocations in light of the big events of the past year.”
Asian stock markets have been among the strongest performers, partly boosted by Chinese start-up DeepSeq, which raised the prospect of serious competition for US AI with the success of its large language model in January.
The MSCI China is up 29 percent, while Hong Kong’s Hang Seng has climbed nearly 28 percent.
U.S. chipmaker Nvidia fell 17 percent in a single day after the release of a DeepSeek model that outperformed U.S. competitors at a lower price, leading investors to question whether huge investments in AI infrastructure were necessary.
Although Nvidia became the world’s first $5 trillion company in October, doubts about AI valuations hit the US market, leading to a sharp selloff in November.
“We lost the enthusiasm (about U.S. stocks) that we really had in January… DeepSeek days,” said Helen Jewell, chief investment officer of fundamental equities at BlackRock. “You suddenly realize that ‘overweight the US’ is not the way to build a portfolio.”
Global investors have also turned to Chinese equities this year. Mislav Matejka, head of global and European equity strategy at JPMorgan, said the bank had “completely flipped” on China this year after signs of an economic revival.
South Korea’s Kospi index has surged more than 75 percent this year, with index tech giants Samsung and SK Hynix rising 124 percent and 268 percent respectively.
European shares were also boosted by economic growth expectations emerging from Germany’s “no matter what” fiscal stimulus package, which most investors expect to begin rolling out next year.
Germany’s DAX has outperformed the S&P 500, while strong economic growth has boosted Spain’s Ibex 35 by 48 percent and the Greek Ethex index by 44 percent.
“For years, America was the only story in town,” JPMorgan’s Matejka said. Now, he said, investors should prepare for “expanded exposure internationally.”
