For more than a decade, U.S.-based stocks have largely dominated the stock market and outperformed their international counterparts. But history tells us that this power dynamic doesn’t last forever, and in recent months, we’ve started to experience a shift which we’ve dubbed “the great rotation.” 

After a period of U.S. dominated markets, international stocks may start to take the lead. Yet, as is often the case in investing, it’s impossible to predict when, exactly, this shift will occur. Rather than try to time the markets (which rarely–read never– works out), investors are better off acknowledging the cyclical nature of market performance and creating a more globally diversified portfolio in preparation.

Participating in both U.S. and international markets, especially as one outperforms the other at different periods along your investment journey, can help optimize your portfolio for long-term performance.

You’re Already a Global Consumer. Why Not Be a Global Investor?

To help paint a picture of just how globally connected our economy is, consider something as humble and (seemingly) all-American as the chocolate chip cookie.

That nostalgic smell of cookies baking in the oven? It’s brought to you by Nestlé chocolate chips—made by a Swiss company. Maybe those cookies were baked using ingredients from Trader Joe’s, which is owned by a German grocery group and baked in a Samsung oven, a Korean brand.

The point? We already consume products from international companies every day. Yet many investors only allocate their portfolios to U.S.-based businesses. If your spending habits are global, your investment strategy should be too.

The Case for a Globally Diversified Portfolio

There’s no question the U.S. is a powerhouse economy and has delivered strong long-term returns, but stock market trends still rotate over time. Building a globally diversified portfolio can help you capture growth wherever it happens.

Consider how markets across the world perform differently based on factors like monetary policy, legal systems, and economic cycles. While exposing your portfolio to international equities comes with some risk (especially if you’re relatively unfamiliar with international markets), it also presents opportunity. Many internationally-based companies have experienced tremendous innovation and growth, and some may offer more resilience or growth potential than U.S.-based companies.

How to Prepare Your Portfolio for the Next Great Rotation

The takeaway is simple: Don’t wait for a clear signal that international stocks are about to surge. That signal rarely comes in advance. By the time you see it, you’ve already missed out on opportunities for growth. Instead, diversify your portfolio now, while still keeping your long-term goals and risk levels a top priority.

Need Help Reviewing Your Investment Strategy?

When it comes to designing or rebalancing your portfolio, think about chocolate chip cookies and the impact our globally connected economy has on what you buy—and moving forward, maybe what you invest in as well.

Curious to see how your portfolio stacks up? You may be less diversified than you think, especially if your portfolio is primarily focused on U.S.-based companies. We invite you to reach out and schedule a call with our team if you’d like to learn more about future-proofing your portfolio in preparation of the next great rotation.