Historically, US earnings outgrew the world by 1%. Post-GFC, this widened to 3%. Investors have extrapolated this recent, higher rate as the new normal, pushing the US CAPE ratio to nearly double that of non-US markets. This represents a historically extreme valuation based on a potentially temporary growth advantage.

A successful 15-year strategy of overweighting US equities was reconsidered when the P/E multiple discount for the rest of the world reached an unprecedented 40%. This shows that even the most durable investment theses have valuation limits that trigger a strategic shift toward more balanced, benchmark-like weights.

Contrary to the dominant narrative of US market leadership, European equities have actually outperformed their US counterparts when measured in constant currency terms since the last US presidential election. This surprising trend is a fact that most investors may not realize.

Emerging vs. developed market outperformance typically runs in 7-10 year cycles. The current 14-year cycle of EM underperformance is historically long, suggesting markets are approaching a key inflection point driven by a weakening dollar, cheaper currencies, and accelerating earnings growth off a low base.

The performance gap between market-cap and equal-weight strategies is not random; it's cyclical and can last for over a decade. While market-cap has dominated recently (winning 8 of the last 11 years), this was preceded by a period where equal-weight won for 13 of the prior 15 years. Recognizing these long cycles is crucial for strategic allocation.

While US equities have traditionally been a bellwether for global sentiment, a significant rotation is underway. Stagnant US tech stocks are being overshadowed by strong performance elsewhere, with European equities up 6% and Emerging Market equities up 13%. This suggests capital is flowing into other markets, reducing EM's dependence on US performance.

The current rotation out of US tech stocks should not be mistaken for a US growth problem. It is supported by better global growth prospects, strong relative earnings, and positive PMI data outside the US, which reinforces the case for pro-cyclical positioning in FX markets and other assets.

While the S&P 500's 19% gain since last year seems strong, it significantly lags global performance. An ETF tracking worldwide stock markets is up 42% in the same period, with markets like South Korea and the Eurozone showing even larger returns. This indicates a potential "sell America" trend among global investors.

A long-term chart pricing the S&P 500 in gold indicates that US financial assets peaked in 2022. This signals the start of a 10-15 year cycle where hard assets like gold, commodities, and emerging market equities are poised to outperform US stocks.