International stocks outperform US stocks in 2025, reversing Wall Street’s decade-long dominance. The S&P 500 ranks a surprising 41st among more than 60 stock indexes worldwide despite posting solid 16% returns. America’s benchmark index trails foreign markets for only the third time in ten years. The global equities vs S&P 500 performance gap reveals how trade wars and a weakening dollar are reshaping global investment flows.
US companies still created over USD 7.7 trillion in market value this year, exceeding the annual economic output of every nation except America and China. Over 5,400 companies list on the New York Stock Exchange or Nasdaq combined. Yet the S&P 500 lagging global markets has caught Wall Street analysts off guard.
Why International stocks outperform US stocks in 2025
President Donald Trump’s return to the White House in late January triggered a shift in global investing patterns. His fluctuating tariff policies prompted investors worldwide to seek more stable opportunities outside the United States. America’s mounting debt, a declining US dollar and pressure on Federal Reserve independence have given investors pause.
The Dollar Index declined 9% since the start of 2025. This currency weakness has propelled international indexes higher as foreign investment returns rise comparatively. European Central Bank President Christine Lagarde warned in October that the dollar’s attraction shows signs of erosion. She emphasised that currency trust requires geopolitical credibility, rule of law and strong institutions.
Trade Policy Uncertainty and Dollar Weakness Fuel S&P 500 Lag Behind Global Markets
The international stocks outperform US stocks and S&P currently trails the MSCI All Country World Excluding US Index by more than 10%. This index tracks 46 countries‘ stock markets and provides a comprehensive benchmark. The S&P 500 previously underperformed in 2017 after Trump’s first term began and in 2022 during aggressive interest rate hikes.
Markets plunged in March 2025 on tariff policy worries after hitting record highs in mid-February. Trump’s early April tariff rollout erased over USD 5.8 trillion from the S&P 500 within days. On 09 Apr 2025, Trump paused most global tariffs, triggering the index’s third-largest one-day gain in history. The Supreme Court now considers the fate of Trump’s sweeping tariff agenda.
Global Equities vs S&P 500: Leaders and Laggards
South Korea’s Kospi index holds the number one spot with nearly 70% returns through early November. The country’s semiconductor exports and emerging defence industry drive this outperformance. Franklin Templeton’s Dina Ting notes South Korea’s leadership in semiconductor manufacturing and AI-related investment as key momentum drivers.
Figure 2: Kospi index chart showing upward trend
Kenya, Nigeria, Chile, Poland, Pakistan, Israel, Spain, Czechia and Jordan round out the top 10 performers. The S&P 500 appears only after more than 40 countries in the global ranking. Goldman Sachs CEO David Solomon told Bloomberg Television that the dollar remains the world’s reserve currency. He acknowledged policy actions caused some pullback but expressed no concern about fundamental shifts.
AI Boom Boosts Tech Giants but Masks Broader Market Weakness in the S&P 500
Trillions of dollars are pouring into artificial intelligence, sending firms like Nvidia, Apple, Amazon and Alphabet to market values as high as USD 5 trillion. The United States currently has nine Companies trading above USD 1 trillion in value. Fears have grown about a potential bubble in the sector.
Figure 3: Red U.S. market chart with flag background
The seven largest tech stocks expect nearly 15% earnings growth for the third quarter. The other 493 S&P 500 Companies face just 6.7% growth expectations. ABN AMRO senior economist Rogier Quaedvlieg wrote on 05 November 2025 that the economy runs at two speeds. AI and related sectors thrive while most other areas remain stagnant or contracting.
Market Rotation Away from Technology Stocks
The Dow Jones Industrial Average hit a record high, climbing 559.33 points or 1.18% to close at 47,927.96 on a recent trading day. The S&P 500 rose 0.21% to 6,846.61 points, while the tech-heavy Nasdaq Composite fell 0.25% to 23,468.30 points. Investors rotated money from technology into lower-valued blue-chip Companies, including Merck, Amgen and Johnson & Johnson.
CoreWeave fell 15% after issuing disappointing guidance as the AI cloud infrastructure provider faced data centre challenges. Nvidia shares pulled back 2% following SoftBank’s sale of its entire USD 5 billion stake. The Technology Select Sector SPDR fund dropped almost 1% as sentiment shifted away from elevated tech valuations.
Valuation Pressures Challenge the S&P 500 Despite Record Earnings
Bill Fitzpatrick, portfolio manager at Logan Capital Management, noted that tech Companies are cash flow machines. However, starting valuations matter significantly for future returns. The S&P 500 lagging global markets, trades well above 20 times earnings, largely driven by the Magnificent Seven and other tech Companies. Some names have lagged behind in the broader bull market.
Figure 4: Analyst at multi-screen trading desk
The Nasdaq has posted month-to-date losses of around 1% as the AI trade faces pressure. Notable names, including Micron Technology, Oracle and Palantir Technologies, moved lower in sympathy. Micron declined 4%, Oracle fell 2% and Palantir dropped nearly 1% in recent trading sessions.
Government Shutdown Resolution Boosts Market Sentiment
Progress toward ending the longest US government shutdown lifted the Dow and S&P 500 index. House of Representatives members returned to Washington after a 53-day break for a vote. The Polymarket betting platform is fully priced in a resolution this week.
CFRA Chief Investment Strategist Sam Stovall said expectations are that the shutdown is over. People will return to work, and economic data will resume. Uncertainty will be behind us once normal operations are restored. However, ADP’s preliminary payroll figures showed private employers shed an average of 11,250 jobs weekly for the four weeks ended 25 Oct 2025.
Currency Factors and International Investment Returns
The sinking dollar has helped propel international indexes higher compared to US markets. As the dollar weakens, foreign investment values and stock returns rise comparatively. A rising or stronger dollar would dampen the relative returns of money invested outside the United States.
Figure 5: Christine Lagarde, President of the European Central Bank
The continued erosion in the dollar’s value makes it more expensive for American Companies and consumers. Import costs rise along with vacation expenses and money transfers abroad. Christine Lagarde warned the US needs careful attention as dominant positions erode over time. Geopolitical credibility and strong institutions remain essential for currency trust.
Health Care Sector Leads S&P 500 Gains as Technology Falters
Ten of the 11 S&P 500 sector indexes rose in recent trading. Health care led gains, up 2.33% and lifted by advances exceeding 2% each. Eli Lilly, Johnson & Johnson and AbbVie posted strong performances as investors rotated capital. The Dow has gained almost 13% in 2025, lagging the S&P 500’s 16% rise and the Nasdaq’s nearly 22% increase.
President Trump warned of an economic and national security disaster if the Supreme Court were to rule against emergency tariff powers. This lingering uncertainty has weighed on market sentiment despite recent advances. The most bullish Wall Street projections for the end of 2025 would leave the S&P 500 in line with most trading blocs within North America and East Asia.
Changing Market Leadership: What 2025 Means for Global Investors
Global stocks beat US equities in 2025, signalling a material change in world market leadership. The S&P 500 trailing foreign markets for just the third time in more than a decade shows the impact of trade policy uncertainty and United States dollar weakness. While American Companies created over USD 7.7 trillion in value, their relative performance trails dozens of countries worldwide.
Figure 6: Major U.S. indexes posted modest daily gains
The global equities vs S&P 500 performance gap widens as currency factors and geopolitical concerns influence investor decisions. Artificial intelligence continues driving tech sector gains but masks weakness across broader market segments. As trade policies evolve and currency dynamics shift, investors increasingly look beyond US borders for opportunities.
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FAQs
Q1. Why are international stocks outperforming US stocks in 2025?
Trade policy uncertainty, dollar weakness and rotation away from elevated US tech valuations drive international outperformance.
Q2. Where does the S&P 500 rank globally in 2025?
The S&P 500 ranks 41st among more than 60 global stock indexes with 16% annual returns.
Q3. Which country’s stock market leads global performance?
South Korea’s Kospi index holds the top spot with nearly 70% returns driven by semiconductors and defence exports.
Q4. How has the US dollar impacted market performance?
The Dollar Index declined 9% in 2025, boosting foreign investment returns and widening the performance gap with US markets.
Q5. What sectors are driving S&P 500 performance?
The seven largest tech stocks drive gains with 15% earnings growth, while the other 493 Companies face just 6.7% growth expectations.
