US Vs. The World: Tactical Tension

US assets have underperformed year-to-date, but BCA views differ on the tactical versus 12-month outlook. Since the start of the year, US markets have lagged the rest of the world, largely driven by the sell-off in software and AI-related stocks. The next phase for US versus the rest of the world was debated at our Wednesday BCA Live & Unfiltered meeting. 

On a 12-month horizon, our Global Investment strategists believe it makes sense to remain underweight the US given its heavy technology exposure (around 45% of the S&P is tech or tech-adjacent) and the risk that AI euphoria fades. Views diverge on the tactical horizon, with strategists noting that recent ex-US outperformance may be stretched. EM and Japan were highlighted, and we have also flagged potential US outperformance versus Europe given stronger relative momentum. 

This environment favors more nimble investors. Those with a longer-term mandate may prefer to wait for a US versus rest-of-world rebalancing and a relative jump in US equities before reducing their US allocation.