In this section, guest authors share their views on economic and financial topics.

For years, the formula for success in equity markets seemed straightforward: overweight US stocks, particularly large growth companies, and largely ignore the rest of the world.

That strategy paid off. But US dominance is now so deeply embedded in valuations, benchmarks and portfolios that investors should reassess the assumptions underpinning it.

The United States remains the world’s largest and deepest capital market, an anchor of global liquidity and a leader in innovation. The point, therefore, is not to write off US equities. The key question is whether their exceptional performance can continue – and how much of that outlook is already priced in.

Three conditions for continued US dominance

Further outperformance by US equities depends on a demanding set of conditions. Productivity would need to continue rising. At the same time, inflation would have to continue declining in an orderly manner, allowing policy rates to remain low enough to mitigate the burden of large fiscal deficits. International investors would also need to maintain their clear preference for US assets despite mounting political, fiscal and geopolitical uncertainty.

«Europe could benefit from pent-up demand, high savings rates and more expansionary fiscal policy.»

The likelihood of all three conditions remaining in place simultaneously is lower than it was a decade ago. At the same time, economic activity, innovation and human capital are becoming more broadly distributed across regions.

Europe could benefit from pent-up demand, high savings rates and more expansionary fiscal policy. A stronger global industrial cycle, rising commodity demand and a weaker US dollar would provide tailwinds for emerging markets. Assets outside the US do not need a structurally weak United States to prosper. A fading of US dominance would be enough.

Concentration is becoming a portfolio risk

A key risk is the narrowing of market leadership. A small group of large US companies, particularly in technology and artificial intelligence, has recently accounted for a disproportionate share of global equity returns.

«US exceptionalism has increasingly been driven by a limited group of companies rather than broad-based market strength.»

Strong earnings, rising valuations and increasing index weights have reinforced one another. Strong performance attracted capital, inflows boosted market capitalizations, and higher index weights generated additional demand. US exceptionalism has therefore increasingly been driven by a limited group of companies rather than broad-based market strength.

This makes many portfolios more vulnerable than they may appear. US companies have certainly delivered superior earnings, but investors have also been willing to pay an ever-higher premium for them. Historically, market leadership has rarely remained with the same segments indefinitely.

Overlooked opportunities come at lower valuations

Beyond large US growth stocks lies a broad investment universe that has lagged over the past 15 years: European equities, emerging markets, small caps, defensive stocks and value equities. Their underperformance has itself contributed to their declining weights in many portfolios.

Over a longer horizon, however, the picture looks different. During the 16 years preceding the latest period of US dominance, all five segments experienced periods of significant outperformance under different market conditions. Europe performed strongly during the expansion of the mid-1990s, emerging markets benefited from the commodity cycle between 2001 and 2010, and small caps performed well in the early 2000s and following the global financial crisis. Defensive stocks held up comparatively well during major market downturns, while value stocks can benefit from higher interest rates and inflation.

«Perfect timing is not what matters. Avoiding one-sided dependencies is.»

Today, many of these segments trade at substantial discounts to the global market. At the end of June 2026, the global equity market traded at a price-to-earnings ratio of 24. European equities stood at 18, emerging markets at 18.6 and value stocks at 18.5. Differences are also evident in price-to-book ratios and dividend yields.

Diversification rather than timing

It is extremely difficult to predict which segment will take the lead next. Geopolitical fragmentation, industrial policy, changing supply chains and technological disruption do not follow neat cycles. What matters, therefore, is not perfect timing but avoiding excessive dependence on a single source of returns.

The five segments respond to different macroeconomic drivers and have historically shown relatively low correlations with one another. European equities could benefit from a fiscally driven recovery, while emerging markets could gain from a global industrial rebound and a weaker dollar. Small caps would benefit from falling financing costs, defensive stocks from an uncertain or stagflationary environment, and value equities from higher real interest rates and persistent inflation.

Diversification alone does not guarantee better results. Initially, it simply broadens the investment universe. Disciplined implementation is crucial, as investors tend to chase recent winners and buy back into underperforming segments too late.

The central portfolio question, therefore, is not whether US equities will become unattractive. It is whether investors want to remain dependent on a single source of returns. In a less predictable world, there is a strong case for reducing that dependence and diversifying across a broader range of return drivers.

David Blitz, Chief Researcher and Peter van der Welle, Strategist, both at Robeco.

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