
Long-term secular themes are developing around the world, resulting in competitive advantages for foreign markets in certain sectors.
U.S. market outperformance is cyclical
Given recent global equity dynamics, it can feel like the U.S. is the only market capable of delivering strong, sustainable returns. However, history shows that U.S. equity outperformance compared to other markets around the world is cyclical, and there have been a number of instances, including in the last 20 years, when foreign markets durably outperform. In other words, just because U.S. markets work now doesn’t mean they always will.
Cycle of U.S. equity outperformance

Source: FactSet, MSCI, J.P. Morgan Asset Management.
Regime change determined when cumulative outperformance peaks and is not reached again in the subsequent 12-month period.
On the Bench, page 46 – U.S. Data are as of September 30, 2024.
Secular international trends result in competitive advantages for certain sectors
Long-term secular themes are developing around the world, resulting in competitive advantages for foreign markets in certain sectors. For example, renewable resources benefit from a push toward European energy independence; and in the emerging world, investment in Artificial Intelligence will drive appetite for semiconductors. Many U.S.-focused investors would be surprised to know that these themes, and others, have kept up pace with U.S. markets.
International market secular themes and trends

Source: MSCI, J.P. Morgan Asset Management. (Left) Bloomberg, Russell, Societe Generale. EM Asia tech: MSCI EM Asia Information Technology Index, European Luxury Goods: MSCI Europe Textiles Apparel and Luxury Goods Index, U.S. Growth: Russell 1000 Growth Index, European renewables: Societe Generale European Renewable Energy Index, Europe biotech: MSCI Europe Biotechnology Index. (Top right) Bloomberg, TOPIX. TSE stands for Tokyo Stock Exchange. The Tokyo Stock Exchange announced in April 2023 that listed companies that trade below book value must outline a plan to maximize shareholder value and comply with shareholder, liquidity and outside director reforms or face delisting. (Bottom right) *Total yield for S&P 500 is as of the latest available. Bloomberg, FTSE, LSEG Datastream, Standard & Poor’s. U.S.: S&P 500, Europe ex-UK: MSCI Europe ex-UK, UK: FTSE 100, EM: MSCI EM, Japan: TOPIX. Net buyback yield adjusts for share issuance. Past performance is not a reliable indicator of current and future results.
Guide to the Markets, page 51 – U.S. Data are as of September 30, 2024.
A changing rate environment could be a catalyst for international markets
While international equities have long been primed for strong performance, there was no catalyst to jump start this process. Now, this seems to have changed. Because U.S. markets are more growth-oriented, they benefit from a low interest rate environment, drawing investor dollars away from international opportunities. Today, U.S. rates are much higher and not expected to fall back to zero, leveling the playing field for foreign markets.
Interest rates and international developed markets

Source: J.P. Morgan Asset Management. (Left) Bank of England (BoE), Bank of Japan (BoJ), BIS, Bloomberg, European Central Bank (ECB), Federal Reserve System (Fed), J.P. Morgan Global Economic Research. Implied policy rates are sourced from Bloomberg and are derived from Overnight Index Swaps. Forecasts, projections and other forward-looking statements are based upon current beliefs and expectations. They are for illustrative purposes only and are not a reliable indicator of future performance. Given the inherent uncertainties and risks associated with forecasts, projections or other forward-looking statements, actual events, results or performance may differ materially from those reflected or contemplated. (Right) FactSet, MSCI, Standard & Poor’s. U.S. = S&P 500 Index, Intl. dev. = MSCI EAFE Index. Growth includes Communication Services, Health Care, Information Technology and Consumer Discretionary. Value includes Financials, Industrials, Materials, Real Estate, Utilities, Energy and Consumer Staples.
Guide to the Markets, page 49 – U.S. Data are as of September 30, 2024.