View from the Observation Deck

Total assets invested in covered call strategies have grown rapidly over the past several years. Data from Morningstar Direct reveals that net assets in the “derivative income” category of ETFs increased by $33 billion in 2024 and $56 billion in 2025, marking five consecutive years of record inflows for the category.

Covered call strategies tend to be most beneficial when the stock market posts negative returns, or when returns range from 0%-10%.

The S&P 500 Index posted a negative total return four times in the table above (including YTD in 2026). The CBOE BuyWrite Index outperformed the S&P 500 Index in three of those four periods (missing the fourth by 0.39 percentage points in 2018). For comparison, there are three years in the table where the S&P 500 Index posted returns between 0% and 10%. The CBOE BuyWrite Index outperformed the S&P 500 Index in each of those time frames.
While covered call options can generate an attractive income stream and serve as a hedge against negative price movement, they may limit the potential for capital appreciation.

There were 14 years in today’s table where the S&P 500 Index notched total returns of 10% or more. The CBOE BuyWrite Index underperformed the S&P 500 Index in every one of them, including last year when the S&P 500 Index increased by 17.86%, vs. the BuyWrite Index’s 8.91%.

Takeaway: Covered call strategies may serve as a unique alternative to the S&P 500 Index. That said, while the income they provide has generally led to outperformance during negative or moderately positive periods, returns often fall short during times where the market is performing exceedingly well. As a recent example, the S&P 500 Index surged by 17.86% in 2025, outperforming the CBOE BuyWrite Index by 8.95 percentage points. As the table above shows, the opposite has been true so far in 2026, with the CBOE BuyWrite Index outperforming the S&P 500 Index by 2.83 percentage points on a total return basis (thru 3/20/26). As noted above, investors continue to allocate record amounts of capital to derivative income instruments amidst heightened volatility from tariffs, geopolitical strife, and deteriorating economic data. Will these factors persist, prompting investors to continue purchasing these strategies? We will report back as updates require.

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View from the Observation Deck

Today’s post is intended to provide insight into the movement of bond prices amidst the current investment climate and prevailing interest rate policy. Aside from the most recent data, other dates in the chart are from prior times we’ve written on this topic. Click here to view our last update to this series.

Since our last update in December 2025, prices have declined for all but one of the indices in today’s chart.

We also note that price observations for five of the eight indices now sit at time series lows, reflecting surging yields and increasing credit spreads amidst weakening jobs data, a downward revision to Q4’25 GDP, and a larger-than-expected increase in February’s producer prices. By contrast, prices for long-duration municipal securities and intermediate term U.S. treasuries increased over the time series despite slight weakness since 11/28/25.

Inflation remains above the Federal Reserve’s (“Fed”) stated goal of 2.0% but currently rests below its long-term average. 

Inflation, as measured by the trailing 12-month rate of change in the Consumer Price Index (CPI), stood at 2.4% in February 2026, down from its most recent high of 3.0% in September 2025. This marks the second month in a row where the CPI was below its 25-year average of 2.5%. 

Takeaway: At last year’s close, the 2026 year-end target rate implied by the federal funds rate futures market stood at 3.05%, representing a decline of 70 basis points over at least two cuts during the year. Much has changed since then, including heightened geopolitical risks from the war in Iran, surging energy prices, higher than expected producer prices, and downward revisions to Q4’25 U.S. GDP. On 3/17/26, the federal funds rate futures market revealed that investors expect fewer rate cuts in 2026 (just one) and a higher year-end target rate (3.38%). As we see it, today’s chart reflects these expectations, with prices for all but one of the Indices we track declining since our last review of this topic (fixed income prices and yields typically move in opposite directions). By contrast, prices of long-dated U.S. municipal securities and intermediate U.S government bonds each increased since our observations on 9/26/25. We don’t find the increase in credit spreads revealed by this data overly alarming as spreads often rise during periods of heightened risk like those outlined above. We will keep close watch on the data and report back as necessary.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The Morningstar LSTA U.S. Leveraged Loan 100 Index is a market value-weighted index designed to measure the performance of the largest segment of the U.S. syndicated leveraged loan market. The ICE BofA U.S. High Yield Constrained Index tracks the performance of U.S. dollar denominated below investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA 22+ Year U.S. Municipal Securities Index tracks the performance of U.S. dollar denominated investment grade tax-exempt debt publicly issued by U.S. states and territories, and their political subdivisions with a remaining term to maturity greater than or equal to 22 years. The ICE BofA Fixed Rate Preferred Securities Index tracks the performance of investment grade fixed rate U.S. dollar denominated preferred securities issued in the U.S. domestic market. The ICE BofA 7-10 Year U.S. Treasury Index tracks the performance of U.S. dollar denominated sovereign debt publicly issued by the U.S. government with a remaining term to maturity between 7 to 10 years. The ICE BofA U.S. Mortgage Backed Securities Index tracks the performance of U.S. dollar denominated fixed rate and hybrid residential mortgage pass-through securities publicly issued by U.S. agencies in the U.S. domestic market. The ICE BofA U.S. Corporate Index tracks the performance of U.S. dollar denominated investment grade corporate debt publicly issued in the U.S. domestic market. The ICE BofA Global Corporate Index tracks the performance of investment grade corporate debt publicly issued in the major domestic and Eurobond markets.

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View from the Observation Deck

In a series of posts last week, we focused on the year-to-date (YTD) total return of the S&P 500 Index’s (“Index”) best-and-worst-performing subsectors. While investment return data can be incredibly useful, we suspect most of our readers are keenly aware that: “past performance is no guarantee of future results.” With that in mind, we thought a discussion focused on what we believe is one fundamental driver of market performance (over time) was warranted. Today’s charts reveal the YTD change in analysts’ calendar year 2026 and 2027 estimated earnings per share (“EPS”) for the fifteen subsectors we highlighted as the worst performers last week (click here to view the parent post). 

• As indicated in the charts above, calendar year 2026 and 2027 EPS estimates for the Real Estate Services subsector declined by 15.8% and 14.0%, respectively, between 12/31/25 and 3/13/26. Real Estate Services was the worst performing subsector YTD in 2026 as of our last post (3/10). 
  
  
• For comparison, Passenger Airlines, which was the fifteenth worst-performing subsector as of our last post, saw calendar year 2026 and 2027 EPS estimates increase by 6.8% and 8.4%, respectively, over the same period. 
  
  
• The software industry provides an additional data point worth mentioning. Calendar year 2026 EPS estimates for Application Software and Systems Software, which were among our fifteen worst-performers last week, increased by 2.5% and 1.8% over the period covered in today’s chart. Estimates for 2027 reveal a similar pattern, increasing by 2.0% and 1.3%, respectively, so far this year.

Takeaway: Continued disruption from artificial intelligence (AI), weakening economic data, and war are just a few headwinds investors must parse as they allocate capital. From our perspective, investors appear to be taking a more conservative stance compared to recent years, which may explain several of the worst-performers highlighted in our discussion last week. Even so, near-term performance may not tell the whole story, in our opinion. As revealed in today’s charts, calendar year 2026 and 2027 EPS estimates for most of this year’s worst-performing subsectors increased over the observed period. As always, these are estimates and are subject to change. We will continue to report back as developments warrant.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry. 

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View from the Observation Deck
Today's blog post is for those investors who want to drill down below the sector level to see what is not performing well in the stock market this year. The S&P 500 Index (“Index”) was comprised of 11 sectors and 125 subsectors as of 3/6/26, according to S&P Dow Jones Indices. The 15 worst-performing subsectors in today’s chart posted total returns ranging from -12.10% (Passenger Airlines) to -21.87% (Real Estate Services) over the period. Click here to view our last post on this topic.

• As indicated in the chart above, the S&P 500 Information Technology Index accounts for four of the 15 worst-performing subsectors year-to-date (YTD) through 3/10.
  
  
• Five of the 11 sectors that comprise the broader Index delivered negative total returns YTD through 3/10. Financials and Consumer Discretionary were the worst performers, generating total returns of -8.69% and -4.99%, respectively. The broader S&P 500 Index declined by 0.71% over the time frame.
  
  
• The smallest S&P 500 Index sector by weight was Real Estate at 1.98% as of 3/6/26, according to S&P Dow Jones Indices. Materials and Utilities were the next-largest sectors with weightings of 2.03% and 2.49%, respectively.

Takeaway: Four of the worst-performing subsectors in today’s chart belong to the S&P 500 Information Technology Index. Information Technology is also the third-worst performing sector in the Index YTD, generating a total return of -4.07% through 3/10. Perhaps unsurprisingly, two of these four subsectors, Application Software and Systems Software, are related to the software industry, which came under pressure from AI disruption earlier this year. Financials generated the lowest total return of all 11 sectors at -8.69% YTD through 3/10. In our view, the sector’s pullback is likely the result of a weakening labor market, rising delinquencies (among lower income households), and an indeterminate end to the war in Iran. As always, there are no guarantees, but there could be some potential deep value opportunities in this group of subsectors. For those investors who have interest, there are a growing number of packaged products, such as exchange-traded funds, that feature S&P 500 Index subsectors.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry. 

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View from the Observation Deck
Today's blog post is for those investors who want to drill down below the sector level to see what is performing well in the stock market. The S&P 500 Index (“Index”) was comprised of 11 sectors and 125 subsectors on 3/6/26, according to S&P Dow Jones Indices. The 15 top-performing subsectors in today’s chart registered total returns ranging from 49.14% (Commodity Chemicals) to 20.03% (Consumer Electronics). Click here to view our last post on this topic.

• As indicated in the chart above, all five subsectors that comprise the S&P 500 Energy Index are among the top performers year-to-date (YTD) through 3/6.
  
  
• With respect to the 11 major sectors that comprise the Index, Energy posted the highest total return for the period captured in the chart, increasing by 26.47%. The second and third-best performers were Consumer Staples and Industrials, with total returns of 10.66% and 9.61%, respectively. For comparison, the Index’s total return was -1.34% over the period.
  
  
• As of 3/6/26, the most heavily weighted sector in the Index was Information Technology at 32.95%, according to S&P Dow Jones Indices. Financials and Communication Services were the next-largest sectors with weightings of 12.54% and 10.53%, respectively.

Takeaway: The S&P 500 Energy Index increased rapidly this year, realizing total returns of 14.43% and 9.43% in January and February, respectively. March has produced more of the same. In fact, energy is the only sector to boast a positive total return (1.00%) in March (through 3/6). In our view, several recent events are likely catalysts for the sector’s outperformance. The most recent (and seemingly most obvious) is the war in Iran, which continues to disrupt global energy supply lines. The price per barrel of WTI crude oil spiked 35.63% in just one week since the war’s inception (2/27/26 – 3/6/26). As noted above, energy company prices were already growing prior to the war, driven in large part by massive U.S. winter storms and investor’s increasing desire for diversification. Today’s list of top performers also includes three entries from the S&P 500 Industrials Index. From our perspective, this is likely the result of U.S. reshoring amidst tariff pressures. There is much debate regarding the legality of these tariffs, but it is our opinion that committed capital is unlikely to be quickly reallocated even if tariffs are struck down.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

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View from the Observation Deck

We update this post on an ongoing basis to provide investors with insight regarding the earnings climate of the S&P 500 Index (“Index”). While quarterly earnings estimates are a useful indicator of a company’s financial performance, they are not guarantees. Equity analysts continually adjust their estimates as new information is obtained. As of 3/4/26, 492 of the 503 stocks that comprise the Index had reported Q4’25 earnings, according to data from FactSet. We previously relied on data from S&P Dow Jones Indices to create the chart above but will be using observations from FactSet moving forward. On a personal note, we congratulate Howard Silverblatt on his retirement from S&P where he worked diligently for nearly 49 years, lending context to an ever-changing investment landscape. Thank you, Howard!

FactSet reported that the Index’s Q4’25 blended, year-over-year (y-o-y) earnings growth rate stood at 14.2% on 2/27/26.

This marks the fifth consecutive quarter of double-digit earnings growth for the Index. 

The percentage of Index companies that beat earnings expectations in Q4’25 (74.8% as of 3/3/26) is below the 5-year average of 78.0%.

At 74.8%, Q4’25’s earnings beat rate is the third lowest in today’s dataset and appears to be at odds with the double-digit earnings growth noted above. We do not see this as a point of alarm, nor do we believe it signals a weakening earnings outlook. Tellingly, each of the eleven sectors that comprise the Index reported y-o-y earnings growth in Q4’25. Meanwhile, calendar year estimates reflect strengthening earnings expectations among analysts. FactSet noted that analysts increased their calendar year 2026 Index earnings estimates from 311.25 to 313.62 between December 31, 2025 and February 26, 2026.

The three sectors with the highest Q4’25 y-o-y earnings growth rates and their percentages were as follows (as of 2/27/26): Information Technology (33.4%); Industrials (26.7%); and Communication Services (13.1%) For comparison, Energy, Health Care, and Consumer Discretionary experienced y-o-y earnings growth rates of 1.2%, 0.4%, and 0.4%, respectively.

Takeaway: At 74.8%, a below-average number of Index constituents reported earnings that exceeded estimates in Q4’25. That said, calendar year earnings estimates hint at record observations in the years to come. FactSet reported that the Index’s bottom-up calendar-year earnings estimates total a record 313.62 and 363.14 in 2026 and 2027, representing y-o-y increases of 14.7% and 13.3%, respectively. For comparison, the Index’s y-o-y earnings growth rate averaged 9.9% over the past 10 years. Revenue estimates lend support to analysts’ earnings optimism. The Index’s blended revenue growth rate was 9.4% in Q4’25, marking the 21st consecutive quarter of revenue growth as well as the highest revenue growth rate since Q3’22, according to FactSet. Are equity markets overpriced, or are current values justified by persistent earnings and revenue growth? Stay tuned!

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector and subsector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector or industry.

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View from the Observation Deck
 
Today's charts are intended to give investors a visual perspective on historical and estimated earnings performance for the S&P 500 Index (“LargeCap Index”), the S&P MidCap 400 Index (“MidCap Index”), and the S&P SmallCap 600 Index (“SmallCap Index”). The charts track each Index’s quarterly earnings per share (EPS) from Q1’24 through Q4’25. They also include Bloomberg’s estimated EPS for Q1’26.

As the chart reveals, two of the three indices saw EPS increase year-over-year (y-o-y) in Q4’25.

Year-over-year EPS increased by 12.1% (LargeCap Index) and 7.3% (SmallCap Index) in Q4’25.

By contrast, MidCap Index EPS are estimated to decline by 4.7% y-o-y during the quarter. 

Looking ahead, estimated 2026 calendar year EPS for each Index were as follows (not in the charts): S&P 500 Index ($314.39); S&P MidCap 400 Index ($207.66); S&P SmallCap 600 Index ($101.66). 

Year-over-year earnings growth rates implied by these estimates are as follows: S&P 500 Index (+16.8%); S&P MidCap 400 Index (+15.2%); S&P SmallCap 600 Index (+16.1%). Calendar year 2026 estimates are particularly notable for the MidCap and SmallCap Indices, which are estimated to see EPS decline by 1.8% and 8.8% y-o-y, respectively, in Q1’26. In our view, this may imply that analysts expect an increasingly fruitful climate among small and mid-sized companies as the year unfolds. 

Takeaway: Our last post provided insight into the earnings and revenue growth rate estimates of the S&P 500 Index and its sectors. Today’s discussion expands our view to include the earnings climate for the mid and small-cap segments of the market. We believe that corporate earnings drive the direction of stock prices over time, especially when the major indices are trading at or near record highs. Near-term data is mixed, in our opinion, with MidCap and SmallCap Index EPS estimated to decline by 1.8% and 8.8%, respectively, in Q1’26. That said, the EPS for each of these Indices are estimated to reach record highs in 2026. As always, these are estimates and are subject to change (and have changed since our last post). We will continue to report back as developments warrant.

This chart is for illustrative purposes only and not indicative of any actual investment. The illustration excludes the effects of taxes and brokerage commissions and other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The S&P MidCap 400 Index is a capitalization-weighted index that tracks the mid-range sector of the U.S. stock market. The S&P SmallCap 600 Index is a capitalization-weighted index that tracks U.S. stocks with a small market capitalization.

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View from the Observation Deck

Today’s post provides an update to 2025 and 2026 earnings and revenue growth rate estimates for the S&P 500 Index (“Index”) and each of its eleven sectors. The Index closed at 6,838 on 2/23/26, below its all-time high of 6,979 (1/27/26), and up a staggering 38.7% (total return) from its most recent low of 4,983 (4/8/25). For comparison, from 1928-2025 (98 years) the Index posted an average annual total return of 9.8%.

Earnings growth rate estimates marched higher for both 2025 and 2026 since our last post on this topic.

The Index’s year-over-year (y-o-y) earnings growth rate estimates were observed at 13.3% and 13.7% in 2025 and 2026, respectively, on 2/23/26. Estimates for both years have increased since our last post when they stood at 11.2% (2025) and 12.8% (2026). Click here to view that post. Just two sectors are estimated to see earnings decline y-o-y in 2025: Energy (-8.3%) and Consumer Staples (-1.7%). In 2026, however, earnings are estimated to increase for each of the Index’s 11 sectors, with Information Technology and Materials leading the way.

Revenue growth rate estimates remain favorable as well. In fact, observations for both 2025 and 2026 also increased since our last post on this topic.

As of 2/23/26, the Index’s 2025 estimated y-o-y revenue growth rate stood at 7.2%, up from 6.3% on 10/31/25. Ten of the Index’s eleven sectors reflect positive y-o-y revenue growth rate estimates in 2025, with eight of them estimated to surpass 5.0% (up from seven in October). Information Technology commands the highest estimated revenue growth rates at 17.4% and 20.5% in 2025 and 2026, respectively. 

Takeaway: Equity market returns remain exceptional. The Index rewarded investors with average annual total returns of 21.1% over the three-year period ended 2/23/26. For comparison, the Index averaged an annual total return of 9.8% from 1928 to 2025. Index earnings and revenue growth rates remain persistently positive, with estimates for 2025 and 2026 increasing since our last post. We find calendar year 2026 estimates particularly notable as they reflect difficult comparisons for most sectors. As revealed above, Information Technology and Materials stand out among their peers for 2026 earnings growth rate estimates. Time will ultimately reveal the accuracy of these estimates, but we maintain that higher revenues could be the best catalyst for earnings growth, which in turn, may provide ballast to lofty multiples.

This chart is for illustrative purposes only and not indicative of any actual investment. There can be no assurance that any of the projections cited will occur. The illustration excludes the effects of taxes and brokerage commissions or other expenses incurred when investing. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The respective S&P 500 Sector Indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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View from the Observation Deck  

In our last blog post (click here for "S&P 500 Index Geographic Revenue"), we provided a geographic breakdown of the revenue streams of the S&P 500 Index (“Index”). While a myriad of factors affect market performance and returns, we were curious as to what the data would reveal if we sorted the Index by sector. The chart above shows just that, with each sector ranked by its percentage of revenue generated outside of North America.

Information Technology, Materials, Communication Services, Energy, and Industrials have the highest exposure to revenue from outside of North America.

Of all the sectors in the Index, Energy (+22.7%), Materials (+16.3%), and Industrials (+14.3%) have the highest total returns year-to-date (YTD) through 2/20. They also happen to generate a sizeable portion of their revenue from overseas (see chart). Communication Services and Information Technology companies have not fared as well this year, shedding 0.14% and 3.42% (total returns), respectively, through 2/20.

Total returns for each of the Index’s eleven sectors are positive over the trailing 12 months ended 2/20/26.

The three top performing sectors and their total returns over the period are as follows: Industrials (30.3%); Communication Services (24.9%); and Energy (23.4%). The three worst performing sectors and their total returns were: Real Estate (6.9%); Financials (3.5%); and Consumer Discretionary (3.2%). For comparison, the Index posted a total return of 14.4% over the period. 

Takeaway: Market breadth has improved this year, with a greater share of the Index’s constituents outperforming the Index itself through 2/20/26 than over the same period in 2025. Companies generating significant overseas revenues are among the top performers (Energy, Materials, and Industrials). Two notable outliers are the Communication Services and Information Technology Indices. Despite generating a significant share of their revenue from overseas, these two sectors shed -0.14% and -3.42% (total returns) YTD through 2/20. As we noted in a recent discussion (S&P 500 Index Sector Prices vs. All-Time Highs), we appear to be in the early stages of a broad rotation. Technology stocks, which have been the second-best performing sector for the past two years, remain below their all-time high from October 2025. By contrast, Materials, Communication Services, Energy, Industrials, Utilities, and Staples each set their all-time highs in February 2026. While we cannot know what the future holds, we expect overseas revenue streams to have a positive impact on the near-term performance of U.S. companies.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance, while the S&P sector indices are capitalization-weighted and comprised of S&P 500 constituents representing a specific sector.

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View from the Observation Deck  

International equities have been front and center in many of our conversations recently. Given their relative performance, there is little wonder as to why. The MSCI World (Ex U.S.) Index produced a 32.7% total return in 2025 compared to 17.9% for the S&P 500 Index (“Index”); the first time the MSCI World Index outperformed the Index since 2022 (when both were negative). Investors have taken notice, especially given the international market’s comparatively low valuations, recent declines in the U.S. dollar, and increasingly expansionary economic policies from several major global economies. In today’s discussion, we break down the Index’s revenues by geography and investigate the potential impact of international tailwinds on the broader U.S. equity market.

The 100 largest public U.S. corporations account for an outsized share of the Index’s total revenues.

As the first pie chart shows, the 100 largest U.S. companies account for nearly 55% ($10.12 trillion of $18.54 trillion) of the Index’s total revenue. Additionally, nearly 33% of those revenues are sourced outside of North America (right-side chart). 

In a break from long-term trends, international equities significantly outperformed their U.S. counterparts last year.

International equities, as measured by the MSCI World (ex U.S.) Index, posted average annual total returns of 9.2% over the 10-year period ended 12/31/25. For comparison, average annual total returns for the Index were 14.8% over the time frame. As mentioned in the opening paragraph, the MSCI World (ex U.S.) significantly outperformed the Index in 2025. This trend persisted into 2026. The MSCI World (ex U.S.) Index posted a total return of 8.3% compared to the S&P 500 Index’s 0.7% year-to-date through 2/18.

Global GDP growth is estimated to outpace U.S. GDP growth over the near-term. 

In its January 2026 edition of the World Economic Outlook, the International Monetary Fund (IMF) projected that U.S. GDP is expected to increase by 2.4% and 2.0% in 2026 and 2027, respectively. Comparatively, the IMF forecasts that total world GDP will increase by 3.3% and 3.2%, respectively, during those years.

Takeaway: International equities enjoyed their best performance since 2009 last year, driven by attractive valuations, a weakening U.S. dollar, and a favorable global economic outlook. The trend has continued so far in 2026, with the MSCI World (ex U.S.) Index increasing by 8.3% through 2/18. That said, several of the factors driving international equity performance appear to be benefitting U.S. companies as well. American companies with comparatively large non-U.S. revenue exposure are boasting significantly higher Q4’25 y-o-y earnings growth. FactSet reported that the Q4’25 blended y-o-y earnings growth rate for companies generating more than 50% of sales outside the U.S. stood at 17.7% on February 9, 2026. For comparison, the Q4’25 y-o-y earnings growth rate for companies generating 50% or more of sales inside the U.S. stood at 10.0%. As we see it, each of these earnings growth rates reflect strong U.S. corporate performance, but companies with a larger share of international sales exposure are clearly being rewarded.

This chart is for illustrative purposes only and not indicative of any actual investment. Investors cannot invest directly in an index. The S&P 500 Index is an unmanaged index of 500 companies used to measure large-cap U.S. stock market performance. The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets countries (excluding the US) and 24 Emerging Markets countries.

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