As discussed here last week in “US Equity Market Dominance Belies Historic Underperformance,” global shares fared far better than their American counterparts in 2025.

Indeed, 2025’s ex-US equity outperformance was the largest since 1993, even as the largest US companies continue to dominate any benchmark in which they’re included.

As SocGen’s Andrew Lapthorne put it, “despite its record size in MSCI World and the dominance of its companies in the AI-business and for all the attention they received, ignoring US equities altogether was a surprisingly good way to make money in 2025.” Moreover, the irony of extreme concentration is that, as he wrote in the same note, “2025 was a year when returns could be found almost everywhere.”

That’s unlikely to be the case going forward, though. At the least, it’s fair to say “ignoring US equities altogether” won’t likely be a viable strategy in perpetuity unless that’s (literally) your investment mandate.

Most people have to own US stocks, and almost all individual investors are in some way, shape or form indexed to benchmarks which include them. Those benchmarks are arguably becoming riskier as the largest US stocks comprise a bigger and bigger share of global market cap (~30%) and profits (more than a fifth).

That risk’s illustrated by the figure on the left, below, which shows you market cap and profit dominance. Note that the top 10 stocks are “priced to perfection,” as it were, which is to say there’s not a lot of room for error for the names that hold the most weight.

The figure on the right is the corollary: It gives you a sense of just how large the “drift,” so to speak, is if you don’t hold the largest stocks.

“Ignoring the biggest, typically US companies, is a challenge if they are in your benchmark,” Lapthorne went on, noting that “systematically exclud[ing] the top 10 stocks” would leave you running “a historically high 4% and 5% tracking error, meaning that for many, holding these stocks is enforced by their active risk budget.”

The issue, then, is that even during years when you could’ve conceivably done well not owning the US mega-caps, you probably owned them anyway, and are compelled to keep owning because you have to and/or because in the event they do outperform, no one’s to forgive you. All that despite everyone knowing they’re (probably) a bubble.

“Expensive valuations suggest that long-term, finding ways to circumnavigate [the top 10] or hedge them seems to make sense,” Lapthorne remarked. Easier said than done, I’m afraid.