Wall Street Dominance Faces Crucial Test As Global Stocks Soar To 2008 Highs

A global equity index that excludes U.S. companies has broken above levels last seen before the 2008 financial crisis, marking a key technical breakout and posing a direct challenge to the long-standing American market dominance known as the “U.S. exceptionalism trade.”

Between September 2009 and late 2024, U.S. stocks outperformed global equities by an astonishing 340 percentage points, reinforcing the narrative of American market supremacy. But that narrative is now facing growing skepticism.

Still, May's rebound in the S&P 500 suggests the U.S. isn't ready to relinquish its lead just yet.

Global Equities Rally, Led By German Defense Powerhouse

On May 28, the iShares MSCI ACWI ex U.S. ETF ACWX surged to $59.58, its highest price since April 2008. The milestone marks a significant recovery for international equities, which have long trailed their U.S. counterparts.

This market is up 14% year-to-date, beating the SPDR S&P 500 ETF Trust SPY by roughly 13 percentage points—a record pace of relative outperformance since ACWX's 2008 inception.

The rally reflects growing investor interest in markets outside the U.S., fueled by concerns over American political risks and debt sustainability.

Yet, in May, the tide shifted slightly. The S&P 500 has gained 6.7% so far this month—on track for its strongest performance since November 2023—while ACWX has risen 4.7%. It's the first month since January when U.S. equities have outpaced international ones.

A select group of seven global stocks has more than doubled year-to-date, with gains ranging from 104% to over 200%. Most operate in the defense or energy sectors, two industries booming amid rising geopolitical tensions and infrastructure overhauls.

1. Rheinmetall AG RNMBF – German weapons and tank maker, up 207% on Europe's defense spending boom.
2. Hyundai Rotem HYROF – South Korean military and rail equipment producer, up 184%.
3. Hanwha Co. Ltd HWANF – Jet engine and missile maker from South Korea, up 172% amid rising global arms demand.
4. Doosan Enerbility DOOSF – South Korean energy firm, up 141%, with nuclear and hydrogen driving growth.
5. Hanwha Ocean – Builds submarines and LNG ships in South Korea, up 111% this year.
6. Leonardo S.p.A. FINMF – Italy's top defense contractor, up 109%, benefiting from EU rearmament.
7. Saab AB SAABF – Swedish defense firm known for Gripen jets, up 104%.

Technicals Support Global Outperformance

Bank of America's chief technical analyst Paul Ciana views the breakout in the MSCI World ex-U.S. index as more than symbolic.

In a note shared Tuesday, he noted a "technically constructive picture," highlighting key factors such as:

• A rising 50-week simple moving average
• A resilient 14-week relative strength index above 40
• A bullish MACD (Moving Average Convergence Divergence) signal
• A relative ratio vs. the S&P 500 breaking higher in early 2025

Ciana said this offers “the next best chance for the world to outperform the U.S.”

Backdrop: Cracks In The US Exceptionalism Trade

The U.S. equity market reached record highs in February 2025, a month after Trump's return to the White House.

Yet, fears surrounding his administration's aggressive tariff strategy—temporarily paused for 90 days—sparked synchronized April selloffs across U.S. stocks, bonds and the dollar.

A May 2025 downgrade of the U.S. credit rating by Moody's intensified concerns over debt sustainability and the long-term dominance of American assets.

According to Oxford Economics, the downgrade "reinforces the narrative of de-dollarization, credibility erosion and exceptionalism fatigue."

Still, some believe the dollar's primacy remains unchallenged.

"The fact that the U.S. dollar is the world reserve currency has been core to the U.S. exceptionalism thesis," said Savita Subramanian, equity strategist at Bank of America. "No other country has the option, albeit a bad one, of printing money to pay their debt."

“Political gridlock, massive deficits, and trade protectionism have cast doubt on the durability of the dollar's dominance. But for all the grumbling, there's still no real alternative,” said veteran Wall Street strategist Ed Yardeni.

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