The Great Global Stock Swindle

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Now, listen closely, because this is a bit of a pickle. The S&P 500, that rather boastful collection of American companies, has been lagging behind the rest of the world’s stock markets like a snail in a race against a cheetah. A measly 1% gain for the year so far, while the MSCI ACWI ex U.S. Index – which is a fancy way of saying ‘everything else’ – has puffed itself up by a splendid 10%.

Old Kevin Gordon at Charles Schwab – a man who clearly knows his numbers, though probably not his sweets – tells us this hasn’t happened since 1995. That’s a long time ago, before mobile telephones were the size of bricks and before politicians started behaving like particularly greedy badgers.

The trouble, you see, began during the reign of President Trump. A rather… enthusiastic fellow with a fondness for tariffs – those nasty little taxes on everything that crosses a border. These tariffs, meant to make America ‘great’ again, seemed to have the opposite effect. They ruffled feathers, upset trading partners, and generally made the global market a bit cross. Though, to be fair, some of those tariffs have now vanished, like smoke in a strong breeze.

The Global Stock Market’s Rather Nasty Crush

Why is ‘everything else’ doing so well? Well, it’s partly because those foreign stocks are a bit like overlooked sweets – undervalued and ripe for the picking. The price-to-earnings ratio – a complicated way of saying how much you get for your money – is about 32% lower than that of the S&P 500. JPMorgan Chase – a bank so large it practically is a country – points out that this difference is nearly double what we’ve seen over the last two decades. A bit peculiar, wouldn’t you say?

Then there’s the American dollar. It’s been losing its puff, shrinking a bit like a forgotten balloon. This, surprisingly, helps foreign stocks. When you convert your money back into dollars, it’s worth less, so your international investments look even more impressive. The dollar has dropped 10% under President Trump, thanks to those tariffs, rising debts, and a habit of picking fights with the Federal Reserve. A weak economy, you see, leads to a weak currency, and investors, being sensible sorts, move their money elsewhere.

Since January 2025, the MSCI ACWI ex U.S. Index has soared 40%, while the S&P 500 has limped along with a mere 15% gain. That’s a 25-percentage-point difference – an astonishing feat, and quite unprecedented in recent history. It’s like one snail racing a rocket!

Emerging Markets: The Really Juicy Bits

Goldman Sachs, a firm known for its rather clever chaps, predicts the S&P 500 will grow at a respectable 6.5% annually over the next decade. But they’re even more excited about other markets:

  • Europe: 7.5% annually
  • Japan: 12% annually
  • Asia (excluding Japan): 12.6% annually
  • Emerging Markets: 12.8% annually

Emerging markets – those wonderfully chaotic places where fortunes are made and lost – look particularly appealing. You can get a slice of the action with the Vanguard FTSE Emerging Markets ETF (VWO) or the iShares MSCI Emerging Markets ETF (EEM). Both are heavily invested in China, Taiwan, India, and Brazil, but there are a few wrinkles.

The iShares fund is stuffed with South Korean stocks, while the Vanguard fund considers South Korea a ‘developed’ market – a bit like deciding a perfectly good apple isn’t quite ripe enough. And the iShares fund charges a hefty 0.72% fee, while the Vanguard fund is a mere 0.06%. A rather significant difference, wouldn’t you say?

Over the past year, the iShares fund has returned 42%, while the Vanguard fund has managed 30%. The secret? Two popular South Korean stocks – Samsung and SK Hynix – the world’s largest memory chip manufacturers. The AI boom has sent demand for memory chips soaring, and these companies have benefited handsomely. But over five years, the returns have been nearly identical, thanks to that lower fee on the Vanguard fund. So, either fund is a good bet for patient investors.

However, I’d still keep a larger portion of my portfolio in U.S. stocks. Technological innovation, you see, tends to drive economies over the long haul, and the U.S. is currently the leader in that category. It’s like having the best engine in the race, even if the bodywork is a bit dented.

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2026-02-23 11:23