Over the last fifteen years, U.S. stocks, led by large-cap technology, have left international markets in the dust. It has been like the Road Runner vs. Wile E. Coyote in a foot race. The S&P 500 has crushed its international peers, fueled by U.S. leadership in technology, the rise of social media, low interest rates, a strong dollar, a more favorable regulatory environment and many other structural tailwinds.  

After more than ten years of U.S. outperformance, many investors have even given up on international equities altogether. Why bother diversifying when the S&P 500, or even just a handful of mega-cap tech stocks, have seemed like a sure thing? The U.S. stock market always outperforms, right?  

Investors have short memories. From 2000 through 2009, U.S. equities endured what is now known as a “lost decade.” The S&P 500 delivered negative annualized returns over that period. Once you factor in inflation, taxes, and fees, the results are even worse. Meanwhile, international stocks fared much better. Those who stayed diversified didn’t get rich overnight, but they did avoid the brunt of a weak U.S. market that made it harder for many U.S. centric investors to reach their goals.  

Here are some numbers for perspective: 

• 2010–2024: S&P 500 +601% vs. MSCI ACWI ex-USA +98.5% 

• 2000–2009: S&P 500 –9.1% vs. MSCI ACWI ex-USA +30.7% 

Cambria’s white paper, A Bear Market in Diversification, points out that only three other times in the last century have U.S. stocks produced returns like we’ve seen over the past fifteen years. The “Roaring 20s,” the “Nifty Fifty” bubble of the 1960s, and the Internet bubble of the late 1990s. Markets move in cycles. Each of those periods was eventually followed by very challenging times. No one knows what will happen in the years to come, but it does reinforce the idea that the future almost never looks like the recent past. Environments change. Mean reversion happens eventually. The very forces that fuel outperformance often sow the seeds of underperformance in the next downturn. 

The U.S. was the place investors had to be in the 2010s and to this point in the 2020s, but there is no guarantee that this will be the case forever. No one knows what the future holds, especially Wall Street forecasters. That being said, a shift may already be underway. Through August, the MSCI ex- US is up over 22% compared to S&P 500 which was is up just over 10% so far this year. With all the headlines around A.I. and the U.S. stock market going higher, that fact has been lost on many investors.  

International stocks have been supported by cheaper valuations, uncertainty around U.S. trade and fiscal policy, a weaker dollar, and improving growth abroad. While it is a short period of time, for those who stuck with diversification patience is finally being rewarded. 

So, how should investors position themselves moving forward? We will take an investing lesson from an unlikely source: Charles Darwin. While he didn’t invest in stocks, his insight into what leads to the survival of different species applies directly to portfolio construction. It is not the strongest or the smartest that endure, but the ones that can adapt when the environment changes. Investing works the same way. Market trends evolve slowly and then all at once. Valuations stretch, currencies swing, growth migrates, and sentiment changes overnight. Investors who stay diversified are more adaptable and should be better positioned to survive and thrive over the long haul. 

Success in investing is not about being right in one trade, one year, or even one decade. It is about building flexibility and a margin of safety into your approach so that you are proactively positioned for when conditions inevitably change. Market leadership always rotates eventually, often when people least expect it. History has repeatedly shown that building a portfolio around only what is working today can leave you scrambling tomorrow. 

Darwin’s lesson is clear: adaptability wins. For investors, that means diversifying, even if it is frustrating at times. This approach will help ensure your portfolio can adapt to a fast-changing environment and still move you toward your goals in the long run.