The US market’s recent struggles, the persistence of home bias among asset allocators and individual investors and the renewed opportunities outside the US, could signal avenues for investors looking to reassess geographic exposures, according to MSCI research.
The latest research from MSCI analysed the implications of a directional shift that emerged in 2025, when a rare double-digit performance gap opened up in favour of non-US equities over their US counterparts, alongside a shift in fund flows away from the US.
At the same time, the historically strong foreign appetite for US stocks and bonds has shown signs of waning, potentially prolonging the weakness in the US dollar and other US assets.
“For Apac investors, understanding this shift could highlight opportunities for diversification, improved returns, and capital inflows into high-growth markets amid declining US asset dominance,” said MSCI analysts, Anil Rao and Rohit Gupta
Indeed, there has been an “historic shift from US dominance”.
Their research indicates a historic shift in performance from US dominance, with non-US stocks outperforming US equities by 10% year-to-date through April 25, 2025.
“This marks a critical turning point as US equities face downside risks stemming from souring fundamentals and shaken consumer confidence,” said Rao and Gupta.
Instead, “emerging opportunities in Asia Pacific present a compelling case for diversification”.
Notably, India is showing a strong growth outlook paired with more reasonable valuations compared with US mega-caps.
Moreover, “China has become more distinctly EM than other emerging economies, in part because it represents such a large share of the EM market today”
Meanwhile, Japan and Australia still straddle all three regions (the US, Europe and EM), reflecting their connections to both developed and emerging markets.
Historical patterns indicate a potential leadership rotation away from US markets, which have dominated for much of the post-global financial crisis era.
“There are now stronger diversification benefits available than in the past, providing an opportune moment for Apac investors to reassess their strategies,” concluded Rao and Gupta.
