Analysts at Capital Economics suggest that the recent underperformance of U.S. stocks compared to their international counterparts may be short-lived. They point to the strong valuations and earnings of U.S. companies as a key factor. The S&P 500 has surged recently, driven by optimism around artificial intelligence and anticipated interest rate cuts.

Over the past two months, 93% of countries in the MSCI All-Country World Index (ACWI), excluding the U.S., have outperformed the U.S.-focused average. The analysts, including James Reilly, caution this trend is reminiscent of the dot-com bubble. However, they believe it's premature to declare the end of U.S. market dominance, citing high valuations and earnings growth.

Capital Economics suggests that U.S. equities might underperform in the long run. However, they expect the U.S. market to fare better in 2026. Investing.com's ProPicks AI has generated winning stock picks that have outperformed their benchmarks. The AI-powered portfolios are designed to navigate the market and identify promising investment opportunities.