S&P 500 Lags Behind Global Markets by Most in 32 Years

 

S&P 500 Lags Behind Global Markets by Most in 32 Years

US Stock Market Underperforms the Rest of the World at Largest Margin Since 1993



The chart above illustrates the monthly performance spread between the S&P 500 index and the MSCI All Country World Ex-US Index (which tracks global markets excluding the US). The most striking feature of this visualization is that as of April 2023, the S&P 500 underperformed the MSCI All Country World Ex-US Index by a substantial 7.70%. This represents the widest performance gap in 32 years, since 1993, highlighting an unusual situation where the US stock market significantly lagged behind global markets.

Understanding the US Market Underperformance

Looking closely at the graph, we can see monthly performance differences from 1990 to 2024 represented by green bars (when S&P 500 outperforms) and red bars (when S&P 500 underperforms). While the US market has generally delivered stronger performance than global markets throughout most of this period, the recent sharp decline suggests a notable shift in the US economic and stock market landscape.

This underperformance correlates closely with economic uncertainty in the United States in 2025. Particularly significant are President Donald Trump's tariff policies, which began in February and intensified in April, likely placing considerable pressure on US corporate profitability and stock performance. According to market correction and bear market risk analyses from US Bank, these policy changes have contributed to the relative weakness in the US stock market.

Reaffirming the Importance of Global Investment

Historically, international stock markets have periodically outperformed the US stock market. Analysis of MSCI data from 1999 to 2018 confirms that no single country consistently leads the markets, reinforcing the importance of global diversification to reduce portfolio volatility and secure stable returns.

Informed Financials emphasizes the significance of global market allocation, suggesting that during periods of extreme performance disparities like this, investors should consider portfolio rebalancing to manage investment risks effectively.

Key Considerations for Investors

This data provides several important implications for investors:

  1. Reassessing Global Diversification: Investors who have concentrated their portfolios in the US market for extended periods may now need to diversify into global markets.

  2. Recognizing Economic Cycle Changes: The performance gap between US and global markets may indicate shifts in economic cycles, necessitating adjustments to investment strategies.

  3. Responding to Policy Changes: Closely monitoring and developing strategies to respond to government policy changes, such as tariff policies, which can significantly impact markets.

  4. Maintaining a Long-term Perspective: Rather than overreacting to short-term performance differences, it remains important to manage portfolios in alignment with long-term investment goals.

This dramatic performance divergence suggests changing dynamics between the US stock market and global markets, offering crucial insights for the future investment landscape. Investors would be wise to carefully observe these changes and adjust their investment strategies as needed.

Source: Lisa Abramowicz on X.com

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