Global Stocks Outpace the S&P 500 by Historic Margin: Insights from Goldman Sachs Strategists Like Peter Oppenheimer

The U.S. equity market is experiencing its most pronounced underperformance versus global counterparts in three decades. The S&P 500 has advanced less than 1% year to date, while the MSCI ACWI ex U.S. Index has surged 10%—a 9 percentage point gap that represents the widest divergence since 1995. More dramatically, since President Trump’s return to office in January 2025, international stocks have appreciated 40% compared to the S&P 500’s 15% gain, translating to a staggering 25 percentage point outperformance—a gap without recent precedent in financial markets.

According to Kevin Gordon, head of macro research and strategy at Charles Schwab, this divergence reflects a fundamental shift in investor positioning. Capital has increasingly gravitated toward international equities as market participants reassess the risk-reward profile of U.S. assets. The transition reveals mounting concerns about both the valuation premium attached to American equities and the potential economic consequences of current trade policies.

Why International Equities Have Dramatically Outpaced U.S. Stocks Under Trump

The performance divide stems from multiple reinforcing factors. First, valuations tell a compelling story: the MSCI ACWI ex U.S. Index trades at a forward price-to-earnings multiple approximately 32% below that of the S&P 500. While U.S. equities have historically commanded a premium to international markets, the current differential is nearly twice the long-term average, as analysts at JPMorgan Chase have documented. This valuation gap creates an obvious arbitrage opportunity for yield-conscious investors.

Second, currency dynamics have turbocharged international returns. The U.S. Dollar Index has depreciated 10% since President Trump assumed office, driven by concerns that sweeping tariffs, ballooning federal debt, and the administration’s rhetorical attacks on the Federal Reserve will weaken the economy. When a currency weakens, overseas investments automatically generate currency-tailwind returns when converted back to dollars. Investors holding emerging market or developed international holdings have benefited from this dual upside: both appreciating local asset prices and favorable foreign exchange conversions.

Third, political uncertainty surrounding trade policies has created a flight-to-quality dynamic favoring non-U.S. markets. Investors perceive international diversification as a hedge against policy execution risk in America, even as Supreme Court decisions have begun tempering some of the most aggressive tariff proposals.

Peter Oppenheimer’s Forecast: Emerging Markets Set to Win the Next Decade

The gap between U.S. and international equities is expected to widen considerably over the medium to long term, according to senior equity strategists at Goldman Sachs. Led by chief strategist Peter Oppenheimer, the firm has published detailed return projections for the coming decade that suggest a material reallocation would be prudent.

Goldman’s analysis projects the S&P 500 will compound at approximately 6.5% annually over the next ten years. However, other major regions are forecast to deliver substantially stronger returns measured in U.S. dollars:

• Europe: 7.5% annually
• Japan: 12% annually
• Asia (excluding Japan): 12.6% annually
• Emerging Markets: 12.8% annually

Peter Oppenheimer’s projections underscore why emerging market equities are attracting increased allocations from institutional and individual investors alike. A twelve-percentage-point annual return differential versus U.S. equities compounds to extraordinary wealth creation over a decade-long investment horizon. Goldman’s forecasts suggest that international equities, particularly those in developing economies, represent a compelling long-term opportunity.

Building Exposure to Emerging Markets: ETF Options and Trade-offs

For investors seeking direct exposure to Goldman’s favored asset class, two dominant exchange-traded funds provide convenient implementation: the Vanguard FTSE Emerging Markets ETF (VWO) and the iShares MSCI Emerging Markets ETF (EEM).

Both funds maintain substantial exposure to the world’s largest emerging economies—China, Taiwan, India, and Brazil—but present distinct characteristics. The iShares vehicle includes meaningful positions in South Korean equities, particularly Samsung and SK Hynix, the planet’s preeminent memory chip manufacturers. The Vanguard fund does not classify South Korea as an emerging market and therefore excludes these holdings.

This compositional difference explains recent performance divergence. Over the past year, iShares EEM returned 42% versus Vanguard’s VWO at 30%. The outperformance derives almost entirely from concentrated positions in Samsung and SK Hynix, which have benefited tremendously from the artificial intelligence boom and insatiable demand for memory semiconductors.

However, a different picture emerges when examining longer time horizons. Over five years, both funds have delivered nearly identical cumulative returns, as the Vanguard fund’s significantly lower expense ratio of 0.06% (versus iShares’ 0.72%) has offset the iShares fund’s superior recent component performance. For patient investors, either option represents a viable path to emerging market exposure.

A Balanced Approach to U.S. and International Allocation

While the data supporting international diversification appears compelling, a prudent long-term investor should maintain a meaningful overweight to U.S. equities within a diversified portfolio. The fundamental driver of long-term economic growth and equity returns is technological innovation, and the United States maintains an undisputed lead in this domain. Silicon Valley’s concentration of artificial intelligence capability, venture capital, and human talent suggests continued U.S. dominance in innovation-driven sectors.

The optimal strategy likely involves supplementing core U.S. equity holdings with meaningful allocations to international developed markets and emerging economies—essentially executing a barbell approach that captures both the innovation premium inherent in American equities and the valuation and growth optionality of international markets. Such positioning allows investors to benefit from the outperformance thesis articulated by strategists like Peter Oppenheimer while maintaining exposure to the long-term structural advantages of the U.S. investment landscape.