September 22, 2025

QuickTakes

Investing in the World

It's a big world with lots of investment opportunities. We continue to favor the United States, but it's hard to overweight the US when it already accounts for 64.7% of the market capitalization of the All Country World (ACW) MSCI (chart). That's up from a low of 42.0% in late 2009.

We can also observe the outperformance of the US by tracking the ratios of the US MSCI stock price index to the ACW ex-US MSCI stock price index in both local currency and in US dollars (chart). Both remain on solid uptrends even though the US has been a global underperformer so far this year, especially in dollars.

As we've noted before, the forward earnings of the US MSCI has been outperforming the rest of the world's forward earnings since the end of the Great Financial Crisis (chart). It is still doing so, which is why the US has outperformed in previous years.

The same can be said of forward revenues (chart). The companies in the US MSCI have been able to grow their revenues much faster than companies in the rest of the world.

The companies in the US MSCI collectively also have had a higher forward profit margin than companies in the rest of the world (chart). Currently, the US margin is 13.9%, compared to 9.9% for the rest of the world.

The only problem is that buyers must pay up for those superior US earnings, revenues, and margins: The US MSCI's forward P/E has been trading at an increasing premium compared to the rest of the world (chart). It is currently 23.2 versus 14.9.

Since the start of the bull market on October 12, 2022, the US MSCI has risen 87.4%, trailing only Taiwan (120.4%) and Spain (119.8%), both in local currencies (chart). So far this year, the US has been an underperformer. That's even truer when the performance of overseas stock markets is adjusted for the weaker dollar.

We have been drilling down into the FTSE sectors around the world on a ytd basis. (See our FTSE Country Sector Performance ) One conclusion is that the outperforming sectors of the Developed World FTSE so far this year are those that tend to grow fastest in developed economies, namely Technology, Financials, and Telecommunications (chart).

In the Emerging Markets FTSE, the top outperformer is Basic Materials (chart). That makes sense since many EMs are commodity producers. Also performing well are the Consumer Discretionary, Telecommunications, and Health Care sectors. These sectors tend to prosper in countries with relatively young and rapidly growing populations.

The table below is a useful tool for tracking country and sector performances.

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