S&P 500 sinks to 66th globally despite record highs and 11% YTD rally

The S&P 500 is finally being exposed for what it is this year; a global laggard. Despite literally making over a dozen all-time highs and an 11% rally year-to-date, the S&P 500 has slipped to rank 66 among the world’s top-performing equity indexes, according to Bloomberg.

That puts the S&P far behind Greece’s Athex, Israel’s TA‑35, and even Ghana’s stock market. This is the weakest relative performance for America’s flagship index since the 2008 financial crash.

The S&P 500’s struggle looks even worse when stacked against other developed markets. Germany’s DAX, Japan’s Nikkei 225, South Korea’s Kospi, Spain’s IBEX, and Ghana’s exchange are all outperforming.

When measured in dollars, the gap widens, since the U.S. dollar has fallen 7.3% this year, which inflated gains on foreign markets. Colombia and Morocco, for instance, have each seen returns of about 39% in dollar terms.

Yet even without the currency effect, the index only ranks 57th globally in local-currency terms. That’s a humbling position for an index that hosts the world’s six biggest companies, alongside icons like Coca‑Cola, McDonald’s, and Walt Disney.

Trade war and instability weigh on investor confidence

Now analysts say the blame is split between Washington’s policies and the changing habits of global investors, because as President Donald Trump continues to escalate his global trade war, foreign funds are turning their attention to domestic favorites.

Tensions deepened on Friday when Trump revived threats of new tariffs on China, rattling markets from New York to Seoul. In the U.S., fund managers are avoiding broad indexes and instead piling into big tech, while others steer clear altogether.

Interestingly, Ghana, Zambia, and Greece now lead global stock returns with rallies above 60% each, while the American benchmark (once the safest bet out there) slacks off. The US is also coming off of back-to-back years with gains north of 20%, easily outstripping the likes of the Euro Stoxx 50 and Nikkei 225. If you take stock of performances since the end of 2022 to 2024, the S&P 500 ranked 10th.

Europe, Asia, and emerging markets take the lead

Across Europe and Asia, markets are buzzing. Lower interest rates and cheaper valuations are driving capital away from the U.S. European borrowing costs are half of America’s, giving companies easier access to financing.

Stocks on the continent trade at valuations roughly 35% lower than in the U.S., giving investors more upside. Germany’s Rheinmetall AG has tripled this year, lifting the DAX to a 22% gain, helped by Berlin’s push for higher defense spending. Banco Santander in Spain has nearly doubled, boosted by stronger bank earnings.

The S&P 500, meanwhile, has become dangerously top‑heavy. Just six companies are responsible for over half its gains this year, while an equal‑weighted version of the index is up only 5.6%. It trades at 22 times forward earnings, a 46% premium to the global average.

After a 53% surge between 2022 and 2024, valuations have hit a level that’s pushing even loyal investors to diversify. But according to a Bank of America survey, global fund managers were 14% underweight on U.S. stocks in September while being 15% overweight in the euro zone and 27% overweight in emerging markets.

Many are reallocating capital toward regions with broader growth and cheaper entry points.

South Korea’s Kospi is up 50% this year as the new president promotes shareholder‑friendly laws and bets on the country’s chip giants, Samsung Electronics and SK Hynix, both securing chip deals with OpenAI.

Japan’s Nikkei 225 has hit record highs thanks to SoftBank Group’s 142% jump, along with Mitsubishi Heavy Industries and Japan Steel Works, which gained on hopes of increased defense spending.

Even China, long shunned by foreign investors, is back in play. Alibaba’s plans to ramp up AI investments and Huawei’s move to challenge Nvidia in high‑end chips have reignited interest, with the Hang Seng Tech Index surged 40% this year (more than double the Nasdaq 100’s advance).

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