Why U.S. Stocks Are Off to the Worst Start Since 1995*

Why It Matters

The widening U.S.–global performance gap could trigger a reallocation of capital toward international equities, reshaping portfolio construction and risk management for global investors.

Key Takeaways

• U.S. equities lagging, worst start since 1995 versus global markets
• Non‑U.S. markets up ~8% YTD, driven by valuation gaps
• U.S. price‑to‑earnings premium 40% over international peers currently
• Investors eye Japan and Europe for diversification amid U.S. concentration
• Future outperformance needs earnings growth, not just multiple expansion

Summary

The video highlights that U.S. equities have posted their weakest start to a calendar year since 1995, trailing global markets that are posting solid gains.

Goldman Sachs data shows the U.S. index is flat to slightly negative YTD, while ex‑U.S. benchmarks are up roughly 8%, translating to a 30% annual advantage. The gap is fueled by a 40% price‑to‑earnings premium for U.S. stocks, heavy tech weighting, and a lingering geopolitical risk premium.

Analysts point to concrete examples: a new $36 billion Japan‑U.S. trade tranche targeting oil, gas and critical minerals, Europe’s valuation‑driven rally that masks thin earnings growth, and strong earnings multiples in Korea and Taiwan driving emerging‑Asia outperformance.

If non‑U.S. markets cannot sustain earnings‑based returns, the current performance gap may narrow, prompting investors to diversify away from a tech‑centric U.S. portfolio and reassess asset allocation toward regions offering better risk‑adjusted upside.

Original Description

U.S. stocks are having their worst start since 1995, the same year Pixar’s original Toy Story was released. Yahoo Finance Host Julie Hyman, Yahoo Finance Reporter Jake Conley, and Citi Wealth Chief Investment Officer Kate Moore break down what investors need to know.

For more expert insights and analysis on the latest market action, check out Yahoo Finance’s Morning Brief weekdays 9:00 am (ET).

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