On the matter of global vs US equity

Investment Solutions 

Relative to US equities (shown here by the S&P 500 Equal Weight Index), global equities (shown here by the MSCI EAFE Index) have been in a downward trend since 2008. In March 2025, however, that trend broke. This provides good support from a technical perspective for a positive view on global equities relative to US equities.

MSCI EAFE Index’s relative strength vs. the S&P 500 Equal Weight Index

*MSCI EAFE/S&P 500 EW line represents the MSCI Europe Australasia and Far East index divided by the S&P 500 equal weights index. Past performance is not an indication of future returns Source: FactSet and EFGAM calculations. Data as at 12 March 2025.

The breakout we are currently witnessing could have important implications for investors. Survey data from Bank of America shows investors hold a greater overweight allocation to US equities than to other regions.

In addition, global equity valuations relative to their own history appear more attractive than in the US. While valuations taken in solitude do not provide a meaningful signal, the fact that analysts are revising down earnings expectations for US equities and revising up earnings expectations outside the US for 2025 and 2026 make us optimistic about the prospects for a change in leadership.

To summarise, the breakout of the MSCI EAFE Index/S&P 500 Equal Weight Index from its 17-year downward trend, provides a strong argument from a technical perspective to favour global equities over US equities. The additional evidence gleaned from positioning, valuations and earnings fundamentals data give us even greater conviction on this call.

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