Widening the lens: The case for non-US stocks

Outside the spotlight, a select group of non-US equities has quietly-but decidedly-made a case for itself.

Each year for the past decade, an average of 82 of the top-100 performing stocks in the MSCI All Country World Index were headquartered outside the US, their gains driven by strong business models and secular tailwinds that mattered more than their physical address.

For investors wary of allocating away from the US, these stocks suggest a selective approach to non-US markets could pay off, especially given gaps in valuation between US and non-US peers, and an equity cycle that is showing signs it could be due for a change.

The Mag 7's outperformance in the S&P 500 Index is widely recognised.

Less known is that, in some cases, top contributors in non-US indices have also achieved robust gains.

In fact, while the Mag 7 returned a cumulative 62% since early 2022 on an equal-weighted basis, the top seven contributors in the MSCI EAFE Index delivered 55%, benefiting in part from less volatility, such as during the broad market pullback in 2022, and lower valuations.

Though non-US equity benchmarks have trailed the S&P 500 Index for more than a decade, a number of stocks outside the US have delivered some of the best gains during that period.