U.S. Stocks Up 18% This Year, But Global Markets Surge 29%

Double-Digit Gains for S&P 500 Fueled by AI Boom
Outperformed by Stronger Asian, European, and Emerging Markets
High U.S. Stock Valuations and Tariff Concerns Remain Key Risks

This year, despite the U.S. stock market recording double-digit gains fueled by the artificial intelligence (AI) boom, Asian, European, and emerging markets have generally shown stronger momentum, resulting in the U.S. market's returns lagging behind comparatively.

Traders are working on the floor of the New York Stock Exchange (NYSE) in the United States. Photo by AFP

According to the Financial Times (FT) of the United Kingdom on December 29 (local time), the S&P 500 index on the New York Stock Exchange has risen by about 18% so far this year.

While this is a solid performance of nearly 20%, the 'MSCI All Country World Index excluding the U.S.,' which reflects global stock performance outside the United States during the same period, soared by approximately 29%, significantly outpacing the returns of the U.S. market. The gap in returns between U.S. and non-U.S. markets is the largest since the 2009 global financial crisis.

Major stock markets in countries such as China, Japan, Germany, and the United Kingdom have outperformed the U.S. benchmark S&P 500 index. The MSCI Emerging Markets Index surged by nearly 30%. In particular, strong expectations for Chinese AI startup DeepSeek have driven Greater China markets higher, with the MSCI China Index up 29% and the Hong Kong Hang Seng Index up 28% so far this year.

DeepSeek attracted global attention in January by releasing its large language model (LLM) R1. The model was evaluated as being competitive with those of U.S. AI companies. Its relatively low cost structure, compared to its performance, has also raised questions in the market about whether the massive AI infrastructure investments by major U.S. tech companies are truly justified.

The Korean stock market is also cited as a representative strong performer. The KOSPI index has soared by more than 75% so far this year. Leading domestic semiconductor companies Samsung Electronics and SK Hynix have surged by 124% and 268%, respectively, driving the index's gains.

Several factors are cited as reasons why investors are shifting their attention from the U.S. to other regions: the leap in Chinese AI technology, the burden of high valuations for U.S. tech stocks, and the hardline trade policies of a potential second Donald Trump administration. After President Trump announced reciprocal tariffs on the world in April, the market plunged but later rebounded. However, concerns remain that long-term trade uncertainty could weigh on the U.S. market.

Within the asset management industry, there is a growing view that concentrating investment portfolios on U.S. stocks is no longer a safe strategy.

Matthew Beesley, CEO of Jupiter Asset Management, stated, "U.S. stocks are more expensive than many other markets, their growth is facing challenges, and everyone already owns a lot of U.S. stocks," adding that his stock investment strategy for 2026 is "anything but America." He continued, "It's a good opportunity to think about assets that investors do not already own in large quantities."

Mislav Matejka, Global and European Equity Strategist at JP Morgan, advised, "For years, the U.S. market was the only focus, but now investors need to pay attention to internationally expanding earnings."