International Stocks Wake Up — Non-US Markets Take the Lead
S&P 500 returns after developed international beats US stocks by 5% in three months
US stocks dominated global returns for over a decade after the financial crisis, and episodes of international leadership have been rare and mostly short-lived. This chart flags each period when developed international markets (tracked by EFA) outperformed the S&P 500 by 5% or more over three months, then shows what followed — a direct test of whether these rotations tend to persist or fade.
| Date | 1M return | 1Y return | 5Y return |
|---|---|---|---|
| 2002-04-15 | -0.5% | -19.7% | +33.5% |
| 2003-06-17 | -3.0% | +11.9% | +32.2% |
| 2003-12-18 | +5.4% | +9.7% | -18.5% |
| 2004-10-25 | +7.5% | +9.6% | -2.5% |
| 2005-08-30 | +1.6% | +8.0% | -10.6% |
| 2006-03-09 | +1.8% | +10.6% | +1.8% |
| 2007-02-23 | -0.9% | -5.5% | -6.0% |
| 2007-11-08 | +2.8% | -36.9% | -6.4% |
| 2008-05-08 | -2.6% | -33.5% | +16.9% |
| 2009-01-28 | -15.9% | +24.1% | +105.3% |
| 2009-09-14 | +2.3% | +6.8% | +90.5% |
| 2010-08-02 | -6.8% |
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
International rallies have repeatedly sparked calls that the decade of US dominance is ending. The historical record of what followed each signal is the honest way to judge how often those calls proved early.
For a US investor, international returns combine local stock performance with currency moves. A weakening dollar can drive international outperformance even when foreign businesses aren't outearning American ones — worth knowing before extrapolating the trend.
US dominance is not a law of nature; international stocks led for extended stretches in past decades. Rotation signals are a reminder that geographic diversification exists for the regimes when leadership genuinely changes.
Use an international rotation signal to review the portfolio's actual geographic split against its target — long US-led markets typically leave allocations more US-concentrated than intended. Consider rebalancing to the written international weight rather than chasing the rotation or dismissing it; the target itself, not the quarter's leader, should drive the allocation.