Christopher Wood, global head of equity strategy at Jefferies, believes the U.S. equity market has already passed its peak, signaling a turning point for advisors who have long relied on U.S. stocks as a core growth engine.
In his latest commentary, Wood argues that several structural and sentiment-driven shifts are eroding the dominance of American markets—and that now is the time for wealth managers to actively diversify client portfolios toward international equities.
According to Wood, U.S. stocks hit a relative high watermark on December 24 of last year, when measured against the MSCI All Country World Index. That outperformance, he says, is unlikely to persist. In a recent Bloomberg interview, Wood attributed the fading U.S. advantage in part to trade policy missteps that have weakened America’s global standing and the broader appeal of U.S. assets.
“Since the start of the year, my base case has been that U.S. equities reached their apex last Christmas Eve,” said Wood. “What we’re seeing now are the ripple effects of a damaged brand, particularly in the wake of renewed tariff announcements.”
Wood is especially critical of former President Trump’s tariff regime, arguing that the economic and reputational consequences are both severe and long-lasting. While many market participants may hope for a reversal of trade restrictions, Wood cautions that even a policy U-turn would not undo the erosion of confidence among global investors.
One of the most visible indicators of this shift is the sharp decline in the U.S. Dollar Index, which has fallen 8% year-to-date since the April 2 tariff announcement. For Wood, this decline reflects not just macroeconomic factors but a broader deterioration in the perceived safety and reliability of U.S. financial leadership.
In a client note last month, he emphasized that dollar dominance has historically been central to the narrative of American exceptionalism in global markets. “The U.S. dollar has been a pillar of financial stability, a key reason why global capital flowed into American assets,” he wrote. “But that advantage may have peaked with the re-election of Trump and the revival of protectionist policies.”
From a valuation perspective, Wood flags additional concerns. Last year, U.S. stocks represented an outsized 67% share of global market capitalization, an “extreme” level even in the context of strong U.S. economic growth. Meanwhile, the S&P 500’s price-to-sales ratio climbed to a record high, a warning signal that valuations have become increasingly detached from fundamentals.
At the same time, sentiment indicators have raised red flags. Talk of “American exceptionalism” resurged in the fourth quarter of last year, just as valuations were topping out. For Wood, this kind of narrative peak often precedes a market top. “When the consensus view becomes that the U.S. will indefinitely outperform, that’s usually the point of maximum risk,” he said.
Recent equity market gains, he noted, have been driven more by hope than by fundamental shifts—particularly the hope that Trump might reverse course on tariffs. But such optimism may be misplaced. “Even if there is a walk-back, the damage is already done. Global capital has alternatives now, and we’re seeing rotation take shape.”
Wood sees a “much better catalyst” for equity growth outside the U.S., and he’s advising clients to act accordingly. In his view, the international investment opportunity set is broad and compelling. “I would be adding to positions in China, Japan, Europe, and India,” he said. “These are the markets where asset allocators should be shifting exposure.”
Notably, international net investment in the U.S. has plunged in recent years, reinforcing the thesis that the U.S. is no longer the default destination for global capital. This has implications not only for equity markets but also for fixed income and currency flows.
For RIAs and wealth managers, the message is clear: the era of U.S.-centric portfolios may be drawing to a close. Advisors who have leaned heavily into large-cap U.S. equities—particularly in the technology and consumer discretionary sectors—may find themselves overexposed to market segments that no longer offer the relative return potential they once did.
Wood’s outlook dovetails with broader discussions across the asset management industry about the need to reassess geographic allocations. With U.S. valuations stretched and volatility rising, global diversification is becoming less a hedge and more a strategic imperative.
This sentiment is echoed by a growing chorus on Wall Street that questions the sustainability of the so-called “U.S. exceptionalism trade.” As U.S. equities lose their luster and volatility increases across both equity and bond markets, a “sell America” narrative may be taking hold, prompting investors to explore underweighted regions with more favorable risk-return profiles.
Volatility itself, Wood argues, has become a telltale sign of shifting capital flows. Wild swings in both equity and fixed-income markets are not just about economic data or Fed policy—they’re part of a broader re-evaluation of the U.S. as a portfolio cornerstone.
To navigate this environment, Wood advises portfolio managers to think globally and lean into areas with supportive policy frameworks, favorable demographics, and healthier valuation multiples. In his analysis, Asia and Europe offer relatively stronger fundamentals and are benefiting from investor flows that once defaulted to the U.S.
For example, Japan continues to draw interest thanks to corporate governance reforms, improving earnings quality, and a supportive Bank of Japan. Meanwhile, Europe’s valuations remain attractive compared to historical norms, and India is drawing attention for its growth trajectory and domestic demand story.
China presents a more complex opportunity, but Wood maintains that it remains too large to ignore—especially as Beijing attempts to stabilize its financial system and incentivize consumption-driven growth.
What’s more, these markets are not operating in isolation. Structural improvements in capital markets, currency management, and regulatory transparency in many non-U.S. economies have contributed to their investment case. For institutional and high-net-worth clients, the opportunity to access growth at lower valuations may be a compelling narrative going forward.
Ultimately, Wood’s call for geographic diversification is not a tactical trade—it’s a strategic shift. “It’s not just about avoiding tariffs,” he said. “It’s about acknowledging that the world has changed, and the U.S. no longer holds a monopoly on equity market leadership.”
For advisors serving affluent and ultra-high-net-worth clients, this message resonates at a time when many portfolios are disproportionately exposed to U.S. assets, particularly within passive strategies that mirror the cap-weighted S&P 500.
The recommendation is clear: look beyond U.S. borders. Whether through active managers with international mandates, region-specific ETFs, or global balanced portfolios, RIAs may need to recalibrate client exposures to align with the evolving macro and geopolitical landscape.
Advisors should also communicate this shift clearly with clients, framing it not as a retreat from U.S. markets but as a natural progression toward a more globally balanced allocation—one that reduces concentration risk and positions clients for opportunities emerging outside the traditional strongholds of American large-cap equities.
In summary, Christopher Wood’s thesis challenges long-held assumptions about U.S. market leadership. For advisors and asset managers, it serves as a timely reminder that the global investment landscape is evolving—and portfolios must evolve with it.
