NEW YORK — This year, the phrase “America First” doesn’t seem to apply to stock markets as the U.S. fails to lead the global market rally.
Although U.S. stocks have risen throughout 2025, nearing a record high just last week, they have lagged behind international stock indices in cities like Mexico City, Paris, and Hong Kong.
The disparity in returns is significant, with a global index of 22 out of 23 developed countries—excluding the U.S.—outperforming the S&P 500. As of Monday, this international index has climbed 7.5%, compared to just a 1.7% increase in Wall Street’s benchmark.
Several factors contribute to this gap, which marks a notable shift from the prolonged period of U.S. market dominance. Previously, the U.S. stock market benefited from a robust and steady economy that outpaced most other nations.
Now, with U.S. markets often perceived as overvalued, especially the Big Tech stocks that dominate the market cap, many investors see international stocks as more attractively priced.
Morgan Stanley strategist Michael Wilson noted a growing interest among clients in exploring opportunities beyond the United States. This includes rising tech players from China, like DeepSeek, which claims to have developed an advanced and cost-effective large language model capable of rivaling major U.S. tech companies.
Meanwhile, other countries appear more willing to lower interest rates, typically boosting stock markets. For instance, the European Central Bank reduced rates in January. Conversely, the U.S. Federal Reserve has maintained its rates, as minutes from the meeting hinted at concerns over inflation driven by factors such as former President Donald Trump’s tariffs.
The rising U.S. dollar value against other currencies has further bolstered international exports, whereas some American corporations anticipate reduced profits due to the stronger dollar’s negative impact.
An example is Amazon, which reported a $900 million impact due to currency value changes in its latest $187.8 billion quarter revenue. It anticipates an even larger unwanted impact of $2.1 billion for the current quarter.
Investment professionals have taken notice of these trends. Global fund managers continue to favor big U.S. tech names like Apple and Nvidia, known collectively as the “Magnificent Seven.” However, the perceived peaking of U.S. market exceptionalism is becoming clearer, as noted by Bank of America strategist Michael Hartnett in a recent research report for BofA Global Research.
