INVESTING ABROAD COULD PAY OFF

Countries overseas are stimulating their economies, and their stocks are compelling bargains.

- BY ANDREW TANZER

EACH day, hundreds of millions of market participants around the world follow the news and events and modify their investment portfolios accordingly. At some point during the past year, investors began to question the assumption of so-called American exceptionalism and the priced-to-perfection valuations of U.S. stocks, particularly when compared with much cheaper stock market valuations abroad.

Jay Pelosky, founder of TPW Advisory and a veteran market strategist, thinks the first crack formed last year when the unveiling of China's low-cost artificial intelligence tool DeepSeek AI called into question the sky-high valuations of U.S. mega-capitalization tech stocks. Then came the “rollout of tariffs by the Trump administration—chaotic, at best—which unnerved investors who had looked at the U.S. as a safe haven,” Pelosky says.

The sequence of events triggered an outflow from the dollar (off 10% from its January high, as measured by DXY, the U.S. dollar index), Treasuries and U.S. stocks. “All of a sudden, you no longer had to be in U.S. tech or, arguably, in the U.S. at all,” says Pelosky. “I believe that we're in the beginning of a secular leadership change from the U.S. equity market to the rest of the world.”

If so, we're in the early stages of shifting tectonic plates. From 2010 through 2024, the performance of U.S. stocks crushed that of foreign markets, following a nine-year period (2001-09) when international stocks led. At the end of the recent 15-year cycle, “expectations were too high in the U.S. and too low in the rest of the world,” says Christian Heck, an international stock fund manager at First Eagle Investments. “The U.S. doesn’t have a monopoly on great businesses.”

So far this year, U.S. and foreign markets have traded places. During the first four months of 2025, foreign stocks, as measured by the MSCI ACWI ex-USA index, gained 9% while the S&P 500 index lost 5%.