Is the MSCI EAFE Index Poised to Outperform the S&P 500?

Investment experts at JPMorgan Chase are suggesting that a major shift in the stock market may be on the horizon, with the MSCI EAFE Index potentially outperforming the S&P 500 in the coming decade. This index tracks the performance of large and mid-cap companies in Europe, Australasia, and the Far East, serving as a benchmark for international equity portfolios.

Over the past 16 years, the S&P 500 has significantly outperformed the MSCI EAFE Index. However, analysts Andrew VanWazer and William M. Smith believe this trend could reverse soon. According to them, the S&P 500 has delivered average annual returns of 11.9% compared to the MSCI EAFE Index’s 3.6% since mid-2008.

Recent developments, such as China’s AI startup DeepSeek challenging US tech giants and uncertainties surrounding US economic policies, could contribute to a potential shift in market leadership. JPMorgan’s Long-Term Capital Market Assumptions forecast that EAFE stocks may outperform US stocks by 1.4% over a 10- to 15-year horizon.

Many investors have been skeptical of this prediction, but market events highlighting US equities’ vulnerability to tech-stock volatility, trade tariffs, and declining consumer confidence are raising eyebrows. With factors like rising inflation, trade tensions, and geopolitical uncertainties in play, the MSCI EAFE Index could be well-positioned to outperform the S&P 500 in the foreseeable future.

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