The investment landscape is undergoing a significant shift, with global stocks outperforming US equities, driven by a broadening of earnings growth and a reassessment of geopolitical risks. For over a decade post-financial crisis, US stocks were the clear leader, but the last two years have seen a durable rotation. In 2025, the MSCI All Country World ex US index gained over 29%, nearly double the S&P 500's 16% return, with Brazil and Canada leading. Early 2026 has extended this pattern, with Japan, Brazil, and China outperforming while the US sits in the middle of the pack.
This shift is underpinned by earnings dispersion. Emerging market earnings are forecast to grow around 17% annually through 2026, compared to roughly 12% for the US market. Crucially, earnings leadership is no longer concentrated solely in top US tech giants. The AI investment cycle, once a US-dominated theme, has globalized, benefiting supply chains in Asia and Europe, as seen in the surges of South Korea's Kospi (up nearly 76% in 2025) and Japan's Nikkei.
Simultaneously, a "Sell America" trade resurfaced in January 2026, triggered by geopolitical tensions. Former President Donald Trump's push to "acquire" Greenland and subsequent tariff threats against eight European allies led markets to question US predictability as the global anchor. On January 20, the S&P 500 fell over 2%, long-dated Treasury yields jumped, and the dollar weakened—a rare simultaneous sell-off signaling a repricing of sovereign risk rather than economic fundamentals.
This event was compounded by stress in the Japanese government bond market, where yields surged after snap elections were called, causing a disorderly unwinding of global leverage that pressured US Treasuries. Unlike typical sell-offs, bonds failed to act as a safe haven, rising in yield alongside falling equities. Gold prices surged to record highs above $4,850 an ounce, reflecting stress in sovereign debt markets and concerns over political influence on institutions like the Federal Reserve.
The current situation differs from a similar "Sell America" panic in April 2025. Then, foreign capital quickly returned, bolstering Treasury holdings and US equity allocations. Now, investors are less convinced of a geopolitical off-ramp, questioning the use of markets as pressure points. While the US economy remains resilient and the dollar retains its reserve status, the premium placed on US assets is being scrutinized amid better-valued global alternatives and spreading earnings growth.
