Is This a Great Year for U.S. Stocks? It's Not Comparable to the Rest of the World

When ranking the world’s best-performing stock markets this year, the U.S. is nowhere near the top.
The S&P 500 doesn’t crack the top 10 or even the top 25. You have to scroll all the way down to the 66th spot before finding the U.S. benchmark, lagging behind countries like Greece and Israel. It’s one of the weakest relative performances for the American market since the global financial crisis.

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What makes this surprising is that the S&P 500 has still managed an impressive 11% gain in 2025, hitting multiple record highs. Yet when measured in dollars, it’s been outpaced by nearly every major developed market from Germany’s DAX and Japan’s Nikkei 225 to indexes in South Korea, Spain, and Ghana.

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A key factor behind this divergence is the dollar’s decline. The U.S. currency has fallen about 7.3% this year, boosting returns on foreign assets when translated into dollars. That’s a major reason why markets in Colombia and Morocco have posted gains of nearly 40%. Still, even in local-currency terms, the S&P 500 only ranks 57th worldwide a surprisingly low showing for an index anchored by giants like Apple, Microsoft, and Amazon.

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Analysts say the U.S. market’s relative underperformance reflects a shift in global investor sentiment. As President Donald Trump escalates his trade war recently renewing threats of higher tariffs on China international investors have been favoring their own domestic champions. Even within the U.S., investors have become more selective, pouring into big tech names while avoiding broad-based exposure to the market.

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Adding to that are concerns over America’s political and fiscal outlook. Trump’s new tax and spending plans are expected to expand the federal deficit, while an ongoing government shutdown since early October has heightened uncertainty. The president’s public clashes with the Federal Reserve and an increasingly politicized approach to public spending have further dented confidence.

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Together, these factors have weakened the dollar, shaken faith in U.S. assets, and fueled a strong rally in gold. Long-term Treasury yields have stayed elevated, signaling that investors are demanding more compensation for risk.

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“The deteriorating U.S. fiscal situation and mounting policy uncertainty are undermining confidence in American markets,” said Jasmine Duan, senior investment strategist at RBC Wealth Management Asia. “That’s encouraging investors to look for better opportunities abroad.”

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To be fair, predictions of a mass exodus from U.S. stocks have surfaced for years and often fizzled. The dollar’s slump has even moderated recently as political tensions rise globally, from France to Japan to Argentina.

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Still, the U.S. trails far behind top performers like Ghana, Zambia, and Greece, whose stock markets have soared more than 60% this year. Yet it’s worth noting that the S&P 500’s 11% rally has added roughly $6 trillion in market value equal to over a third of the entire Stoxx 600’s capitalization.

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And context matters: after two consecutive years of 20%-plus gains, the S&P 500’s strength remains remarkable. In fact, if measured over the period from late 2022 through 2024, the index ranked among the world’s top 10 performers.

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Several global factors are driving the relative outperformance abroad. For one, borrowing costs in Europe remain roughly half those in the U.S., allowing companies to finance growth more cheaply. Valuations are also far more attractive, with European equities trading about 35% below their American counterparts.

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Germany’s Rheinmetall AG, for instance, has tripled this year amid rising defense spending, helping lift the DAX index by 22%. Spanish banking giant Banco Santander has nearly doubled as European financials rebound from years of stagnation.

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In Asia, South Korea’s Kospi index has surged 50% as investors bet that the country’s new leadership will introduce shareholder-friendly reforms. Korea’s role as a hub for advanced semiconductor manufacturing home to Samsung Electronics and SK Hynix, both key AI suppliers has fueled excitement around the nation’s equity market.

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“Asia has been an excellent source of diversification for our portfolios,” said Sophie Huynh, portfolio strategist at BNP Paribas Asset Management. “It’s where we’re finding real alpha opportunities across asset classes.”

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Japan has also been a standout. Expectations that a pro-stimulus candidate will become the next prime minister have pushed the Nikkei 225 to record highs. SoftBank Group has skyrocketed 142% this year, while defense equipment makers Mitsubishi Heavy Industries and Japan Steel Works have rallied on hopes for increased government spending.

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Meanwhile, global investors are cautiously returning to China. Renewed optimism around the country’s high-tech sector bolstered by Alibaba’s ramp-up in AI spending and Huawei’s ambitions to rival Nvidia has fueled a strong rebound. The Hang Seng Tech Index is up 40% in 2025, more than doubling the Nasdaq 100’s gains.

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The S&P 500’s long rally has left it looking expensive. The index now trades at 22 times forward earnings about a 46% premium to global peers. It’s also highly concentrated, with mega-cap tech stocks representing more than one-third of its weight. After a 53% surge since 2022, many foreign investors have started trimming their U.S. exposure.

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“Investors should be rebalancing taking profits in the U.S. and rotating more into Europe, Asia, and emerging markets,” said Kristina Hooper, chief market strategist at Man Group. “The U.S. is likely to continue lagging.”

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That said, foreign buying of U.S. equities remains strong, supported by the dominance of AI-focused leaders like Nvidia. But global portfolio managers are becoming more selective. According to a Bank of America survey, fund managers were 14% underweight U.S. stocks in September while overweight European and emerging-market equities.

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The narrowness of the U.S. rally underscores this trend: just six companies account for over half of the S&P 500’s gains in 2025. An equal-weighted version of the index which strips out size bias is up only 5.6%.

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“The last two years were all about U.S. tech,” said Beata Manthey, head of global equity strategy at Citigroup. “Now the growth gap between the AI boom and the rest of the world is shrinking and next year, that gap will narrow even further. Investors finally have more themes to play with.”

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