Past performance is not indicative of future results. Chart is for illustrative purposes and is not indicative of the past or future performance of any product. EPS= Earnings Per Share
A popular topic of conversation among investors has been the idea that after a healthy run, U.S. exceptionalism may be out of steam. Over the period of January 1 to May 31, 2025, International equity markets have outperformed the U.S. for the first time since 2017.[1] Still, we believe the S&P 500 Index will continue its strategic outperformance. Why? One key reason is superior earnings growth.
Earnings can help predict relative returns across different regions when one examines their long-term performance trends. Since 2010, S&P 500 earnings grew at an annualized rate of 9.6%, outpacing the STOXX 600 Index by 1.7 times and three times for the more concentrated EURO STOXX 50. Additionally, this year S&P 500 earnings are expected to grow 8.8% compared to 2% for the STOXX 600 Index and 3.6% for the EURO STOXX 50. [2]
As we discussed in previous weeks, greater productivity and labor market characteristics in the U.S. are priming the domestic economy for faster growth than its peers abroad. Economic growth feeds stock market returns and earnings growth, which is anticipated to rank highest in the U.S. For these reasons, we expect U.S. exceptionalism to resume and strategic outperformance to persist. As a result, we continue to favor U.S. equities over the rest of the world.
1; 2Source: FactSet, May 30, 2025.
IMPORTANT INFORMATION
All investments involve risk including loss of principal. Certain investments involve greater or unique risks that should be considered along with the objectives, fees, and expenses before investing.
Past performance is not necessarily indicative of future results. Asset allocation and diversification do not ensure a profit or protect against a loss.
Equities are subject to market, market sector, market liquidity, issuer, and investment style risks to varying degrees. Small and midsized company stocks tend to be more volatile and less liquid than larger company stocks as these companies are less established and have more volatile earnings histories. Investing in foreign denominated and/or domiciled securities involves special risks, including changes in currency exchange rates, political, economic, and social instability, limited company information, differing auditing and legal standards, and less market liquidity. These risks are generally greater with emerging market countries.
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