After more than a decade of outperformance, U.S. equities are showing signs of weakness relative to international markets in 2025. The S&P 500 (SPY) has gained 15% year-to-date, trailing the MSCI All Country World Index ex-U.S. (ACWX) by approximately 25 percentage points as foreign stocks have appreciated 40%. This divergence marks a significant reversal from the consistent advantage U.S. markets have maintained since 2010, driven by factors including technology sector concentration and relative valuations.
A technical pattern known as a "death cross"—where shorter-term moving averages fall below longer-term ones—has emerged in the SPY/ACWX ratio for the first time since 2018. This rare signal typically indicates momentum shifts in relative asset performance and may reflect changing investor allocation decisions. Portfolio managers have begun rotating capital toward non-U.S. equities, with particular interest in emerging markets including South Korea, Brazil, Mexico, and Taiwan.
The performance differential suggests investors are reassessing geographic diversification after years of U.S. market concentration. While the duration and magnitude of this potential structural shift remain uncertain, the technical indicators and capital flows warrant monitoring by institutional and individual investors managing global equity exposure.