The U.S. Stock Market: From Hyper Exceptional to Merely Exceptional — What It Means for Investors in 2025 and Beyond
This year, the U.S. stock market’s performance has been a tale of cautious optimism rather than outright dominance. While the S&P 500 has managed a modest gain of just over 4% in 2025, it’s notably lagging behind international markets that have surged impressively. The iShares MSCI ACWI ex US ETF (ACWX), for instance, is up nearly 17% year-to-date, with German stocks soaring over 30% and Chinese equities climbing more than 18%. At first glance, this might suggest a shift away from American exceptionalism in investing—but Apollo Global CEO Marc Rowan offers a nuanced perspective that investors need to hear.
The Shift from Hyper Exceptionalism to Mere Exceptionalism
Rowan, speaking at the Morningstar Investment Conference, coined a phrase that perfectly captures the current state of the U.S. market: we’re moving from "hyper exceptional" to "merely exceptional." What does this mean? Over the past decade, a handful of U.S. tech giants—think Apple, Microsoft, Amazon, and Nvidia—have dominated the market, collectively representing 40% of the S&P 500 with sky-high price-to-earnings ratios that peaked around 60. Nvidia alone briefly boasted a market cap larger than every stock exchange except Japan’s. This concentration created a unique “hyper exceptional” environment that was hard to replicate anywhere else.
However, with valuations normalizing and money flowing into other regions, the U.S. is now "merely exceptional." It remains a compelling market, particularly because of its tech sector, but investors are increasingly diversifying into Europe and China, where valuations are more attractive and growth opportunities are emerging.
Why the U.S. Market Still Commands Respect
Despite the relative underperformance, the U.S. stock market remains far from unattractive. Rowan aptly describes the U.S. as “the cleanest dirty shirt” compared to Europe and China—meaning that while it has its challenges (ballooning fiscal deficits, geopolitical risks), these issues are even more pronounced elsewhere. The resilience of the U.S. tech sector is a key pillar supporting this view. In 2025 alone, sectors like information technology and communication services have surged 21% and 15%, respectively, with semiconductors (tracked by the VanEck Semiconductor ETF, SMH) up more than 30%. Nvidia’s 40% gain is a standout example of how innovation and market leadership continue to drive U.S. equities.
What This Means for Investors and Advisors
For investors, the takeaway is clear: diversification is no longer just a buzzword—it’s a necessity. The era of relying heavily on a handful of U.S. tech giants for outsized returns is evolving. Here’s what you should consider doing differently now:
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Expand Global Exposure: With Europe and China showing strong performance and relative value, allocating a meaningful portion of your portfolio to these regions can enhance returns and reduce risk. For example, German stocks have benefited from a post-pandemic industrial rebound and green energy investments, while China’s market recovery is supported by easing regulatory pressures and stimulus measures.
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Focus on Quality and Innovation: While diversifying geographically, don’t abandon the U.S. tech sector. Look beyond the mega-cap names to emerging leaders in AI, semiconductors, and cloud computing. These areas are likely to sustain growth and innovation momentum.
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Monitor Fiscal and Geopolitical Risks: The U.S. fiscal deficit and geopolitical tensions remain wild cards. Investors should stay informed about policy changes, especially those impacting interest rates and trade, as these can influence market sentiment and capital flows.
- Adopt a Tactical Approach: Given the shifting landscape, a more active or tactical investment approach may be warranted. This means regularly reassessing sector and regional exposures rather than sticking to a static allocation.
Looking Ahead: What’s Next?
According to Morningstar and Apollo Global insights, the coming years may see a more balanced global investment landscape. The U.S. will remain a powerhouse but no longer the sole leader. Investors who embrace this transition will be better positioned to capitalize on growth opportunities worldwide.
A recent report from MSCI highlights that emerging markets, including China, are expected to contribute nearly 40% of global GDP growth over the next decade—underscoring the importance of international diversification. Meanwhile, Europe’s push toward sustainability and digital transformation could unlock new sectors for growth.
Final Thought: Don’t Bet Against American Innovation—But Don’t Ignore the Rest of the World
The U.S. stock market’s “mere exceptionalism” doesn’t spell doom; it signals maturity and a more nuanced investment environment. For advisors and investors, this means blending the innovation-driven growth of U.S. tech with the value and growth prospects abroad. In the words of Marc Rowan, the U.S. is still the cleanest dirty shirt—investors just need to recognize when to wash it and when to wear a different one.
Stay tuned to Extreme Investor Network for the latest actionable insights as we navigate this evolving global market landscape together.
Sources:
- Morningstar Investment Conference, 2025
- Apollo Global Management CEO Marc Rowan Interview
- MSCI Global Market Outlook 2025
- VanEck Semiconductor ETF (SMH) Performance Data
Source: U.S. still ‘exceptional’ after 2025 overseas outperformance, Marc Rowan says