Here's Why Here's Why US Stocks Underperformed The World in 2025
Dec 19, 2025
Michael Msika, a seasoned market strategist, dives into the unexpected underperformance of US stocks in 2025 despite record highs. He discusses how Europe and emerging markets surged ahead, attributing this to factors like tariff impacts and shifting corporate strategies. Msika also explores the implications of tech concentration and AI on market volatility. With a forward-looking perspective, he forecasts a promising convergence in earnings for 2026, highlighting the potential rise of European fiscal support and emerging markets.
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US Exceptionalism Challenged
- US exceptionalism weakened as other regions adopted policy and fiscal moves, reducing the dollar's dominance.
- A ~13% fall in the dollar signaled global asset flows away from US markets in 2025.
Companies Adapted To Tariff Shock
- Tariffs and trade volatility caused a mid-year drawdown but corporates adapted with price hikes and cost cutting.
- Earnings held up because companies adjusted supply chains and pricing, enabling a sharp recovery.
Policy Shifts Boost Non-US Markets
- Europe and emerging markets gained as central banks eased and fiscal spending picked up, narrowing the growth gap with the US.
- Policy convergence and structural reforms made non-US equities more attractive in 2025.