Bon Voyage! Why Your Portfolio Should See The World

By: Jack Strulowitz

If you have been invested in the S&P 500 for the past fifteen years, your portfolio has probably done well. The S&P 500 is a simple, one-decision stock market index of the 500 largest American companies, and it has been one of the best-performing investments in the world during that stretch. There was no obvious reason to look elsewhere. Then 2025 happened. International developed markets returned roughly 32 percent for the year while the S&P 500 returned approximately 18 percent (Source: MSCI, S&P). That gap is worth understanding, because the forces behind it did not appear overnight.

The case for staying home has been genuinely strong. Through the 2010s, the S&P 500 compounded at roughly 15 percent annually (S&P). To put that in real terms, a $100,000 investment at the start of the decade grew to over $400,000 by the end of it. International developed markets returned closer to 10 percent over the same period (MSCI), a meaningful gap that widened every year. A large portion of that outperformance traces to a small group of technology companies that came to dominate global markets in a way that had no real historical precedent, and which international markets had virtually no exposure to. That is a legitimate track record.

The difference between U.S. and international investing today can be illustrated with a simple real estate comparison. Imagine two investment properties, each located in a different neighborhood of the same city. The first property sits in a neighborhood that has appreciated dramatically and is now priced at a steep premium. The second property’s neighborhood has been flat, and as a result it is priced at a meaningful discount. The question a thoughtful buyer asks is not which neighborhood performed better historically. It is which one offers more at today’s price. A buyer who chases the first neighborhood simply because it has already gone up is paying full price for a track record, and ignoring the oldest rule in investing: buy low, sell high.

The reason international outperformed in 2025 is not complicated. Eugene Fama, who won the Nobel Prize in Economics in 2013, spent decades studying how markets price assets. His conclusion was simple: the less you pay for an investment today relative to its earnings, the more room it has to grow. International stocks have been cheaper than U.S. stocks by most measures for years, in some cases significantly so. That gap in price does not stay open forever.

The assumption of permanent U.S. dominance is not new. The 1990s looked a great deal like the 2010s: prolonged American dominance, rising confidence that U.S. equities were the only serious option, and a growing tendency to treat the pattern as permanent. What followed was a full decade, 2000 through 2009, in which the S&P 500 delivered essentially nothing while international markets held up meaningfully better (S&P, MSCI).

Many investors think of themselves as diversified because they own stocks across many companies and industries. But owning only U.S. stocks means the entire portfolio is tied to one country’s market. The U.S. represents roughly 60 percent of all publicly traded stock value in the world (MSCI). The other 40 percent simply does not exist in their portfolio. That is not diversification. It is a bet that the country representing 60 percent of global stock value will continue outperforming the remaining 40 for the rest of their investment horizon. When that bet works, it looks like wisdom. When it does not, there is nothing in the portfolio to cushion the fall.

A common objection to this is that many U.S. companies are global businesses. Apple, Microsoft, and most large American corporations generate substantial revenue outside the United States. But when international markets rise and U.S. markets fall, those companies still fall right alongside the rest of the S&P 500, regardless of where their customers are. Owning a U.S. company that sells products abroad is not the same thing as owning international stocks. One is a U.S. investment. The other is genuine diversification.

For investors in or near retirement, the stakes are higher than they might appear. A decade of U.S. underperformance during the years when a portfolio is being drawn down, when there is no opportunity to simply wait out a rough stretch, is precisely the scenario that can permanently alter a retirement plan. International diversification in that context is not about chasing returns. It is about not staking everything on a single market cycle going your way at exactly the right time.

None of this means abandoning U.S. equities. A well-constructed global portfolio still holds substantial U.S. exposure. The case for diversification rests on acknowledging that nobody reliably predicts which market leads next, that what you pay today shapes what you earn tomorrow, and that concentration in any single country is a form of risk that does not always announce itself until it already matters. If you are unsure how your portfolio is currently positioned across global markets, or whether your international allocation makes sense given where prices stand today, that is a conversation worth having. n

Jack Strulowitz is a Financial Advisor at Bernath & Rosenberg in Cedarhurst, NY, where he helps high-net worth individuals and families manage their investments and build comprehensive strategies for retirement, tax, and estate planning. For questions or to schedule a consultation, please contact [email protected] or 847-962-3352.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.

Investing involves risk including loss of principal. No strategy assures success or protects against loss.

Securities and advisory services offered through LPL Financial, a registered investment advisor, member FINRA/SIPC.