As the era of unquestioned US market leadership wanes, shifting global forces and innovation are laying the groundwork for a new cycle in equities, new research from Ninety One’s Investment Institute, finds.
Global equity markets may be entering their most significant transition in well over a decade. After years of capital and confidence flowing in one direction, signs of change are emerging across currencies, valuations and policy cycles.
The Ninety One Investment Institute’s research – The great rebalancing: A new cycle reshaping global equity leadership – explores how the forces that drive long dollar cycles also relate to equity markets and help explain the long cycles of relative performance between the US and the rest of the world.
These forces: geopolitics, policy and growth differentials, cross-border capital flows and the absence of currency intervention, have historically reinforced one another in ways that both sustain dollar cycles and shape the pattern of US versus non-US returns. Understanding how they interact offers insight into the dynamics behind the shifting balance of global equity leadership.
Commenting on the research findings, Dan Morgan, Analyst at Ninety One, said: “History shows that leadership between US and non-US equity markets has tended to shift over long periods. These cycles often move in step with broader dollar trends, reflecting the same underlying macro forces at work. The alignment is not exact, but it is consistent enough to suggest that changes in those forces can mark important turning points in global equity leadership.”
Over recent years, the research says, these forces have combined to extend one of the longest periods of US equity outperformance on record. Strong capital inflows have reinforced the trend. By the end of 2024, international investors held US assets worth $62 trillion, more than twice the size of the US economy. Much of this capital has been drawn to the powerful US technology sector, whose strength and profitability have defined market returns through the last cycle.
“As a result, performance has become increasingly concentrated in a small group of dominant companies. As of June 2025, the largest 10% of US-listed firms had an average market capitalisation of $240 billion, compared with $4.4 billion for the median company, the widest gap in a century.
“Periods of extreme concentration have historically been followed by weaker subsequent returns. The pattern has repeated across past cycles, from the Nifty Fifty era of the 1970s to the aftermath of the dot-com boom, when market leadership broadened and returns became more evenly distributed.”
Periods of intense concentration have typically led to weaker 10-year returns
Rethinking concentration in the age of AI
The drivers of the next cycle are likely to look different, according to the research, with advances in artificial intelligence, renewed investment in infrastructure and the reconfiguration of global supply chains all potentially supporting a broader spread of returns. “Unlike the internet era, when value accumulated in a handful of dominant platforms, AI’s diffusion across industries has the potential to lift productivity in a broader range of sectors and regions.”
Regional equity allocations for the new cycle
“The long cycle of US equity leadership has reshaped global portfolios. Years of strong performance have lifted the US share of global benchmarks to nearly 70%, well above its share of company fundamentals, which sits closer to 40–50%. On measures such as revenues, earnings and dividends, developed markets outside the US contribute around 35–40%, with emerging markets accounting for 15–20%.
“Relying on market-cap-weighted benchmarks is, in essence, anchoring to past returns, returns that have repeatedly proven unreliable guides to future outcomes. Despite its unmatched scale and liquidity, the nearly 70% dominance of the US equity market within global benchmarks creates a distorted lens, undermining genuine geographic diversification. In practice, regional equity allocations will evolve as benchmarks and market values rebalance, reinforcing the value of maintaining flexibility within long-term strategic ranges. Rebuilding balance across regions may prove central to capturing the next phase of global equity leadership.
“Regional performance cycles have remarkable staying power, but once clear evidence emerges that a cycle is shifting, investors can reposition portfolios for sustained new trends. Market-cap-weighted benchmarks anchor portfolios in the past, reflecting yesterday’s winners rather than tomorrow’s opportunities.”
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