U.S. stocks lagged the rest of the world’s gains in 2025, in a rare year of Wall Street underperformance, as concerns about high valuations, Chinese advances in artificial intelligence and Donald Trump’s hardline economic policies prompted investors to diversify their portfolios.
The S&P 500 index accumulated a rise of 17.4% over the year until the close of American markets on Monday (29), below the 29% advance of the MSCI All Country World index excluding the United States – the biggest difference since the global financial crisis of 2009.
The rise of artificial intelligence on Wall Street has contributed to the recovery after the fall caused in April by the tariffs announced by Trump.
Yet the lingering effects of the president’s trade war, coupled with concern over soaring prices of U.S. technology stocks, have led many investors to question the dominant position that U.S. stocks have held for years in global portfolios.
“US stocks are more expensive than many others, their growth trajectory tends to be in question and everyone is already heavily exposed to them,” said Matthew Beesley, managing director at asset manager Jupiter Asset Management. He described his 2026 strategy as “anything but America.”
“It’s a great time to think about what investors don’t already have in surplus,” he added.
Indices in China, Japan, Germany and the United Kingdom outperformed the S&P 500, in a rally for previously undervalued markets. The MSCI emerging markets indicator rose almost 30%, also driven by the devaluation of the dollar.
“There is a clear need to diversify risk,” said Niamh Brodie-Machura, head of equity investments at Fidelity International. “Many investors I speak with are reassessing their geographic allocations in light of the big events of the last year.”
Asian markets were among the strong performers, driven in part by Chinese startup DeepSeek, which raised the possibility of effective competition with the United States in artificial intelligence after presenting a relevant advance in large-scale language models in January.
The MSCI China index is up 29% for the year, while Hong Kong’s Hang Seng is up almost 28%.
American Nvidia fell 17% in a single trading session after the launch of a DeepSeek model whose performance rivaled that of its American competitors, but at a lower cost, leading investors to question the need to invest such volumes in AI infrastructure.
Although Nvidia recovered and in October became the first company in the world to reach a market value of $5 trillion, lingering doubts over artificial intelligence-related valuations put pressure on the U.S. market and contributed to a sharp correction in November.
“The reason we lost that enthusiasm (with U.S. stocks) was actually in January, DeepSeek Day,” said Helen Jewell, director of fundamental equity investing at BlackRock. “We suddenly realized that being too focused on the United States was not the best way to build a portfolio.”
Global investors also began to show more interest in Chinese stocks in 2025. Mislav Matejka, head of global and European equity strategy at JPMorgan, said the bank “completely turned its hand” and started having an above-average position in China, following signs of economic recovery.
In South Korea, the Kospi index is up more than 75% this year, with shares of tech giants Samsung and SK Hynix rising 124% and 268%, respectively.
European markets also benefited from expectations for economic growth boosted by Germany’s self-described “whatever it takes” fiscal stimulus plan, which most investors expect will gain traction next year.
Germany’s Dax index outperformed the S&P 500, while robust economic growth saw Spain’s Ibex 35 index rise 48% and Greece’s Athex index 44%.
“For years, the United States was the only relevant topic,” said JPMorgan’s Matejka. From now on, according to him, investors should position themselves for this “increased performance on an international scale”.
About The Author
