After a decade of outperformance, U.S. stocks have recently cooled. Peter and Jeff name several factors contributing to this shift, share major factors in the United States’ favor long term and discuss where else investors are going with their dollars. Plus, get their tips of the month.
Hosted by Creative Planning’s Director of Financial Planning, Jeff Stolper, and President, Peter Mallouk, this podcast takes a closer look into topics that affect investors. Included are in-depth discussions on financial planning issues, the economy and the markets. Plus, you won’t want to miss each of their monthly tips!
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Transcript:
Jeff Stolper: I’m Jeff Stolper, Director of Financial Planning at Creative Planning. With me is Peter Mallouk, President of the firm, and we are Down the Middle. Within the past week, the 2026 Winter Olympics wrapped up, and in it competed 93 countries. The largest country to compete, as measured by economy size or GDP, was the United States, and the smallest was a small island nation in the South Pacific named Tuvalu.
The United States’ GDP is estimated somewhere around 31 to 32 trillion, whereas Tuvalu’s is around 60 to 80 million. So the U.S. may not have won the medal count within the Winter Olympics, and global investing may be following that a little bit. Over the past decade, the U.S. has been seen as the leader for sure, and U.S. stocks have outperformed. But now what we’re seeing is something a little unusual, certainly within recent history, that people are moving away from an investment standpoint from American stocks. Peter, why do you think that is?
Peter Mallouk: Well, I think it’s been a very short period of time. So it’s probably too early to declare a permanent rotation. I know that’s not what you’re implying here, but markets move. They never ring a bell at the top. You never know when it’s going to shift exactly from growth to value or large to small, or U.S. to overseas. From 2000 to 2010, the S&P 500, you know large U.S. stocks, earned 0% — almost statistically impossible — and that was a very long 3,600 and plus days, right, for people in this industry, right?
And then you had 2010 to 2020. U.S. stocks outperformed everything, absolutely crushed it, largely because the tech revolution was happening inside Google and Apple and Amazon and Microsoft, big American companies. And, you know, coming into this decade, Goldman Sachs, JPMorgan, BlackRock, Vanguard. All said it’s time for international to do well again. But for the first five years of this decade, it could not have been any more wrong, primarily because the AI revolution happened inside U.S. big tech. The AI revolution is happening inside, largely, Microsoft, Google, Amazon, and so on.
And with new, big American companies, like NVIDIA, and big American companies that will probably go public eventually here, like Anthropic and OpenAI. We’re seeing this revolution in the United States that really drove that. And then just magically, last year, it just completely shifted and we saw international and emerging market stocks absolutely crushed the United States. The United States still had a good year, up 16.5%. But at one point, it was the largest gap in performance ever between international stocks and U.S. stocks.
Now, why? Some people say, “Well, there’s more value overseas.” That’s 100% true. The dividend yield was higher, meaning if you own a stock in the U.S., like a Hershey’s, and maybe it’s paying you a 2% dividend, maybe Nestlé, which is a foreign stock, is paying a 3% dividend. I don’t know what dividends they’re paying, but in general, international stocks were paying higher dividends than the U.S. So some people said, “Well, that meant that you get paid more to own those. There’s more value.” Or, “the P/E ratio was better. The multiple of earnings people willing to pay was better overseas.”
And that’s true, but that was true for over a decade, and international stocks didn’t outperform. So it wasn’t just that. Some people think it was the tariff wars and people feeling the need to spread their eggs across a lot of baskets. Now, timing-wise, that seems to have some real implications, because the tariff war began at the very beginning of the year, and that’s really when we started to see international perform better.
I’m not unconvinced that it’s not just happening for not a lot of reasons. Yes, it’s true people wanted to spread their eggs across more baskets. Yes, there’s more value overseas. Yes, people are very, very upset with the United States. People in other countries are not excited about supporting the United States in many ways, for many reasons, whether it’s the tariff wars or our language around Canada or Greenland, or freezing Russian assets, or the dialogue we have with China or what’s happening in the Middle East.
There’s just a lot of people that — they would rather put their money elsewhere. And you see this in the Treasury market too with bonds, where we’re seeing countries like China buy less U.S. bonds, which will have some serious implications at some point that you and I will probably talk about on another podcast. The bottom line is I think there’s not a great reason, and I don’t know that it’s going to persist.
And the reason I don’t know that it’s going to persist is when I talk to people at the very top of the biggest investment houses in the world, and I’m talking about the people that we meet day-to-day, they’re the presidents of the biggest asset managers in the world, you know, some of them still refer to — this is not my language — some of them still refer to Europe as a museum. In other words, it is slowly dying.
It’s got all kinds of issues, and we’ve seen warning signs around this with certain countries like Greece, and we’re seeing more and more warning signs of social unrest, struggling with legal and illegal immigration issues that are putting even more stress on the social network, more social class division. The regulations are very, very difficult to deal with. The tariffs have been very punishing, and it’s become very difficult to do business.
Now, regardless of where your political bias is, there’s just no question it’s harder to do business. It just is. And when you have that friction, friction pushes money away. If you just think about yourself as a regular consumer and you get to do business with a place that’s, “Hey, I hit a button and a package shows up at my door,” or “I have to drive 25 minutes and go do some …” Of course, less friction attracts business.
So I think in the long run, America has a couple of things. One, it has less friction, at least for now and pretty much for the long foreseeable future. Second, the AI revolution is accelerating, and it seems to be completely dominated by the United States. Even all the private companies that are about to go public that dominate the space are in the United States. The United States is the clear leader in big tech and AI. That is the future of markets. We’re seeing that as well.
Now, a lot of that’s priced in, but there’s a lot of reason that I would tell investors, because the number one question we’re getting now is, “Why am I not more overseas?” You should be overseas precisely because there are long periods of time where we’re outperformed, and you should diversify, but you should not be entirely overseas, because the future does look very bright for U.S. companies. Very wealthy families are global all the time. They just are, and this is the reason.
Jeff: It’s certainly a rotation. I mean, from decade to decade or 20-year to 20-year period, whatever the period is, you certainly see that happen, whether it’s the last decade that you mentioned or the ensuing decade after that where the U.S. did really well. But as an investor looks at their portfolio and they’re trying to decide whether they should buy the U.S. chocolate or the international chocolate, what’s that right mix? How do you decide as a diversified investor, and I’m thinking through the mix in my portfolio? What should they be looking at?
Peter: I think you should still be overweight U.S., because, again, you should be wherever there’s the least friction. The second reason is the U.S. is already global. If you go buy Swiss stocks or French stocks, in which we want you to do, whether it’s through international index or some other way, you are going to own companies that are very tied to that economy. If you own Canadian stocks, you’re going to find yourself very overweight: banking, energy, financial services, mineral rights, things like that. That’s what you’re going to find yourself overweight.
In the United States, U.S. companies are global. They’re getting their earnings from everywhere. Walmart is getting its earnings from stores all over the world. McDonald’s is getting its earnings from its locations all over the world. Same with Nike. Same with Microsoft. Same with Meta, which is Facebook, and so on. So when you own the U.S., you have a lot of global exposure. You want to add a minority of your portfolio to overseas. Now you’re diversifying even more internationally. You’re diversifying currency risk and so on.
Jeff: Aside from the international markets versus the domestic market in the U.S. here, part of the discussion, I feel like, should also be around where else investors are going with their dollars. And outside of just maybe going to international, I think you’re also seeing some people go strongly into gold, which we’re seeing a lot of strong performance in. Maybe not so much digital gold though. Why are you seeing that transition too?
Peter: So digital gold being cryptocurrency, I assume.
Jeff: Yeah. Yeah, yeah, yeah.
Peter: Yes. So here’s what’s interesting, is, if you look at gold, gold has had a really good run. And if you’re a diversified investor, you own the S&P 500, mid-cap stocks and so on, you have gold mining stocks and things like that in there. You have exposure to this asset class. So what’s happening? Why would gold do well? Why is Bitcoin and other cryptocurrencies not doing well? I think it’s a multipart answer.
I think if we look at gold, gold historically has been money. Gold was money when the ancient Egyptians were here. Gold was money when Jesus was here. Gold was money around the turn of the century, near the Great Depression, and it’s money today. If somebody told me, “Hey, Peter, I want to put all my money in one asset, and I’m going to go in a time machine, outer space. I’m going to come back in 2,000 years,” I would put it all in gold, because empires rise and fall, and I’ve got to make a decision right now on what’s going to be here 2,000 years from now. It’s going to be gold. Okay? It’s the only thing that will probably still be here 2,000 years from now, because it’s money.
So everything else is tied to that. So what’s happening? Why would gold go way up? Well, it’s going way up because governments like the United States are printing more money. So if it takes a certain amount of dollars to buy a brick of gold, and the U.S. adds $1 trillion every three months into the system, more than it’s collecting, like it’s just using a credit card to create $1 trillion, well, it diminishes the value of the preexisting dollars. So it takes more dollars to buy a brick of gold. It’s that simple.
If you look at the very long-term rate of return of gold, it’s inflation. That’s what it is. It’s basically tied directly to how much the government is manipulating the money supply. If the government tomorrow said, “We’re going to put out $30 trillion of cash,” then gold is going to go up several hundred percent, because it’s going to always take the real store of value.
So it’s also the reason it doesn’t make a great investment over most time periods, because you get a lot of volatility, but you ultimately get inflation. If we go back to the Great Depression, if you avoid the spikes, like we’re in the middle of one right now, you basically get a return that’s like bonds but with more volatility and higher taxes. Stocks, over the very long run, outperform, because, like Warren Buffett says, they produce income for you. They bring something to you.
So gold, the more money printing, the better gold will do. Cryptocurrency has been interesting, because the logic of cryptocurrency is it’s also a store of value, but it’s easier to use than gold, and people are more likely to use it to buy a pizza or buy a house, because we can use our phones and so on. I think most cryptocurrency is doing terrible, because most cryptocurrency is a total fraud that will be totally worthless, and I mean like zero. Right? And we’re seeing that.
It doesn’t matter, whether it’s the Trump coin or the Melania coin or the thousands of other coins — I put Dogecoin in that category — they’re down 90% to 99%, because they’re worthless, and people who buy them are crazy — or I think being manipulated or making mistakes that are going to have tragic consequences. There’s a couple that I think we can have a legitimate discussion about, “Could these emerge as a real cryptocurrency?”
One of them would be Bitcoin, and the argument of Bitcoin being a real currency is, one, “Hey, the government prints a lot of money. So we can’t trust the government to protect the value of a dollar. If you have a dollar a decade later, it might just buy 50 cents worth of stuff.” Second, they say there’s only a certain amount of Bitcoin. They’re not making any more. And so, it will retain its value. And then, three, therefore, people will use this as a currency.
I would say, yes, points one and two are correct. I do think the government is going to print more money and diminish the value of the dollar. That’s why investors should own assets that appreciate at a higher rate than inflation, like U.S. stocks, international stocks, private equity, real estate, and so on, and avoid being a lender where you’re lending money for just 2% and inflation is 3 or 4%. So I’ll cede the first point to the Bitcoin enthusiasts. And then second, yes, of course, they’re not making any more Bitcoin. There’s lots of cryptocurrencies that meet that criteria.
You could create one, Jeff, in the next 10 minutes. You could literally create a cryptocurrency that’s limited and have the same logic, but we’re missing the third part. And the third part is, for something to be a real currency, it has to be widely accepted as a real currency. That’s what the definition of a currency is, is to be widely accepted. It does not have that today. So people buying Bitcoin are saying, “Well, you know, Fidelity has a product to trade it. BlackRock has a product to trade it. Schwab has a product to trade it.”
Okay, great. That is progress, but we don’t see it actually being used as a currency, and the markets right now are rejecting this notion, and the evidence of this is while we are printing more money than we ever had in all of history, when a store of value, which gold enthusiasts and Bitcoin enthusiasts say each are, we have seen gold rocket, because it is a store of value while more money has been printed, and we’ve seen Bitcoin go down while more money has been printed.
So it’s failing the key test of a currency, which is it really a store of value that people will use as a currency. Is it an anomaly? Could it turn around? You know, who knows? I’m not optimistic. It could turn around in the short term. In the long term, I’m not optimistic, and I think this is great proof of that. If you had your money in Bitcoin because you thought it was going to be a store of value, and here the government’s doing exactly what you said they were going to do, they’re printing a ton of money, and you would have been infinitely better off in gold.
Jeff: I think that you made this point, but I want to reiterate: just because it’s being traded on a large platform like Fidelity or somewhere like that, I agree, it does not mean that it’s yet normalized. There’s no way that the average person who logs in and picks a ticker like BTC or whatever it may be, that does not mean that they fully understand it. To me, if somebody’s going in and purchasing on the Fidelity or wherever it is, some kind of Bitcoin, it’s a huge mistake, because the underlying understanding is not there.
Peter: I was meeting with a multibillionaire who’s the president of one of the largest asset managers in the world, and I asked their opinion on Bitcoin, and this is very recently, and he said, “I think it’s going to be the biggest rug pull we’ve ever seen in the financial world.” And I said, “But you have a product. It’s one of the top products in the world. You have a product that’s one of the top products in the world.”
He goes, “I’m agnostic.” He goes, “If someone wants to buy and sell something, I’m happy to create the product for them and make a small fee every time they own this asset.” And you might think that isn’t their job. Right? Their job is to create the products people want and to make a profit off of it. So I think I agree. To me, that’s not the great legitimizer that people may think it is.
Jeff: You mentioned in there if I were to create some kind of cryptocurrency, the only way I would have the knowledge to ever do that is to figure out the appropriate prompt for some kind of AI that says, “Hey, create Jeffcoin, and make sure that it’s widely available and publicized.” And I think we’re going to shift gears a little bit into talking about SaaS stocks and the impact AI and other things are having on them. So SaaS, for those that don’t know, is software as a service.
Examples of this would be things like Salesforce or Microsoft 365, where you’ve got Word and Excel. You’re paying a monthly or annual fee for online access to something. The software developer is in charge of maintaining its security. You just open up a website, and you log in, something like that. But what we’ve seen recently is these software-as-a-service stocks, or SaaS stocks as they’re called, are really getting crushed. Peter, is that AI? Is it something else? What’s going on there?
Peter: This used to be the darling of the stock market, and the idea is “what could be better?” It’s technology. So it’s low labor-intensive. Right? And you’re making money off every single seat that’s using something. If you’re a tax firm, you might be subscribing to software and paying a per-user fee. A lot of businesses use Salesforce, and they’re paying a per-seat fee. Every employee, you pay Salesforce more, and every year, the cost goes up.
So the stock market loves this recurring revenue model where the fee goes up every year, and every time somebody gets hired, the fee goes up. I mean, what’s not to like, right, as an investor? And also a very wide moat, meaning very hard for a competitor to come in and spend billions of dollars or millions of dollars to create a new software that then the company has to go through this huge hassle of annoying their entire employee group and switch to this new system. I mean it’s — no one wants to do it.
So the stock market loves these stocks. Right? Recurring revenue goes up with inflation, a lot of agony to switch, high cost to enter. Well, Anthropic has a product called Claude, and there was some news around how easy it may be to create new products. And the stock market, of course, doesn’t know. We don’t have enough information. Right? But the stock market immediately just destroyed all of these stocks.
We look at Oracle, down over 30%, 40%. Salesforce down almost 50%. These companies getting absolutely destroyed, because the market is trying to figure out, “Well, what’s happening?” Is it really going to be easy for someone who’s going to talk to their phone for an hour and then create some product that’s going to replace Salesforce? And, “Wait, I can create this on my own, create it exactly the way I want, and it’s not going to cost me that much?” And then, “Yeah, then I’ll go through the hassle of moving everybody if it’s really that easy.”
At Creative Planning, we use a lot of subscription-based software. We pay a monthly fee for legal software. We pay a monthly fee for tax software. We pay a monthly fee for insurance software, for investment software, for our CRM. And if we could create custom and do it at a cost that was just a few million dollars, of course we’re going to switch everything. So the stocks have been hit very, very hard.
Now, I was interviewing Robert Smith, who’s the head of Vista. Vista is one of the top private equity firms in the world, and this is their sweet spot, SaaS stocks, and that podcast is one I do separately called Icons and Ideas. And if our listeners haven’t checked it out, there’s been some pretty interesting guests on that so far, including the biggest asset manager in the world, with Larry Fink, and the biggest private credit firm in the world, with Marc Rowan, and we’ve got Robert Smith coming up. So a lot of really cool information.
But Robert just thinks the stock market doesn’t have it right, that the barrier to entry is very significant, that AI is going to be an advantage for the people already in the seats. I’m sure there’s some truth to that, but I think the future is coming very, very fast, and the stock market does not really know yet. Can I pay this huge multiple of earnings for these companies? Could I really count on the fact that companies 10, 20 years down the road are still going to be using this tax software or CRM or whatever? And because of that, you’re seeing the whole space get repriced.
Jeff: You can certainly have a large moat, whether it’s on scale or technology, but it’s not going to last forever.
Peter: This shows the critical part of being diversified, not just across the globe but within the United States. We’re looking at big tech was completely dominating. And this year, that’s not what we’re seeing. This year, we’re seeing companies that people believe, sectors that investors believe may be protected from advances in AI.
We’re seeing things like consumer goods and energy do really, really well, and we’re seeing technology behave very, very poorly. Many of the Magnificent Seven in bear market territory now. Yet the average investor is still doing all right this year if they’re diversified, because who would have thought that all of a sudden, the darlings would be the things that are outside the tech sector, because they’re less vulnerable to all this rapid change.
Jeff: It just shows how quickly the technology is progressing, and how fast, with each iteration of new model that comes out with these AI tools, it’s getting better and better. With that, Peter, let’s move to our tip of the month. What do you have for us?
Peter: So my tip of the month is a lot of people hide cash, gold, something like that in their home. If you’re doing that, make sure your heirs know where it is. I’ve now had three or four times in my career where something has happened, where the most recent one was a family in the Upper Midwest. Someone found money behind a wall by accident. They wound up tearing the whole house apart. A lot of people do have things hidden, and it’s just important, make sure one of your heirs knows where that stuff may be.
Jeff: Hopefully, the amount of money found paid for the drywall repairs. Hopefully, it was more than that. My tip of the month relates to your financial and healthcare powers of attorney. It’s great to have those documents. It’s important if you were to become disabled, somebody can make the appropriate decisions for you, whether that is on your healthcare or on your financial things: accessing your bank accounts, making sure that you can pay your bills, all of that if you were to become disabled.
What oftentimes happens with these documents is you’ll execute them but never revisit them. Things change, whether it’s who you want to have designated as your power of attorney. Laws can change, and you’ve got to make sure your documents are updated for any changes that have been made there, or you may move from one state to another. You should assess if your document is still valid in the state that you live in currently.
So make sure every seven to 10 years, somewhere in there, you are getting those documents out. Hopefully they’re not hidden behind a wall, because they’re certainly going to need to be accessed if you were to become disabled, and just take a quick look. Make sure it’s aligned with what your wishes are still. With that, thank you so much for listening. I’m Jeff Stolper, Director of Financial Planning at Creative Planning. With me has been Peter Mallouk, President of the firm, and we are Down the Middle.
Disclosure: This show is designed to be informational in nature and does not constitute investment advice. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy, including those discussed on this show, will be profitable or equal any historical performance levels.
