iShares MSCI ACWI ex U.S. ETF Poised to Benefit from 8% YTD Rally
US equities are flat to down this year while non-US markets tracked by ACWX have rallied roughly 8% since January and about 30% over the past year. Investors are eyeing ex-US diversification as US stocks trade at a 40% P/E premium and geopolitical risks spur interest in funds like ACWX.
1. YTD Performance Gap
Non-US markets have outpaced the US this year, with ex-US equities up roughly 8% since January compared to a flat to slightly negative return for US stocks, and a one-year gain of about 30% versus 11% for US benchmarks.
2. Drivers of US Underperformance
US equities now trade at a roughly 40% price-to-earnings premium over the rest of the world, compounded by heavy concentration in tech names reliant on AI trends and a persistent geopolitical risk premium tied to tariffs and international tensions.
3. Japan-US $36B Investment Tranche
Japan has committed $36 billion in the first tranche of a $550 billion trade agreement, earmarking funds for oil, gas and critical minerals projects, including a 9 GW natural gas plant in Ohio serving emerging data center hubs.
4. Implications for ACWX
These developments highlight growing investor interest in global diversification and potential capital flows into ex-US equities, positioning ACWX to benefit from improving fundamentals and policy-driven cross-border investments.