As the S&P 500 and Dow Jones Industrial Average push to record highs in 2026, the narrative of American financial supremacy is facing growing scrutiny. A closer look at global equity performance reveals that Wall Street's gains, while solid, are far from exceptional when measured against developed market peers across Europe, the UK, Canada, and Asia. Year-to-date, the S&P 500 and the Dow are up 12%, while the Nasdaq has advanced 14%, according to Reuters market data.
These are respectable figures, particularly following last year's strong performance. However, benchmark indices in the UK, Europe, and Canada have also recently hit fresh peaks, recording year-to-date gains of 10%, 12%, and 12%, respectively. More strikingly, Japan's Nikkei has surged 28% since January 1, outperforming Wall Street by a considerable margin despite significant currency and bond market turbulence.
On the earnings front, U.S. corporate results remain robust. Year-on-year aggregate S&P 500 earnings growth forecasts for calendar year 2026 stand at approximately 30%, before moderating to around 15% in 2027, according to LSEG's Tajinder Dhillon. However, the earnings boom is no longer a uniquely American phenomenon.
UBS equity strategists project 25% earnings growth for European companies both this year and next, driven by a cyclical recovery and large-scale structural investment in artificial intelligence, electrification, and defense. On the macroeconomic front, the gap between the U.S. and its peers is narrowing. U.S. real GDP growth slowed to a 1.5% annualized pace in the second quarter of 2026, down from nearly 3% in 2023.
Meanwhile, the euro zone posted GDP growth of 1.6% in the second quarter, slightly outpacing the United States. Citi's economic surprise indexes — which measure actual data against consensus forecasts — show the euro zone currently at its highest reading in three and a half years, while the U.S. index sits at its lowest level in three months. Monetary policy dynamics are also shifting the relative attractiveness of global equity markets.
The Federal Reserve's inflation-adjusted policy rate is currently around zero, a level that has historically supported equity valuations. However, real rates in both the euro zone and Japan are even lower, at approximately minus 0.7%, potentially offering a more accommodative backdrop for those markets. The U.S. dollar, meanwhile, is flat against a basket of major G10 currencies so far this year, providing neither a meaningful tailwind nor headwind for multinational corporate earnings.
Valuation remains a key differentiator. On a forward 12-month price-to-earnings basis, U.S. equities remain significantly more expensive than European and UK counterparts, though more comparable to Japanese stocks. The critical question, as noted by market observers, is whether Wall Street's premium valuations can continue to be justified by earnings growth — particularly as AI investment, estimated at nearly $600 billion in the U.S. alone this year according to Goldman Sachs, may already be fully priced into U.S. stocks.
Callie Cox, chief market strategist at Ritholtz Wealth, encapsulated the current investor dilemma. "We may be reaching a pinnacle of sorts in earnings and economic momentum, and investors are struggling with what comes next," she said. "We're in market purgatory, and this may still be a good time to be strategic about where value lies." For all the strength of U.S. corporate fundamentals — and the record levels of foreign demand for U.S. equities — the broader investment landscape suggests that relative value may increasingly favor markets outside of America.
As Jamie McGeever, columnist for Reuters, writes from Orlando, the era of unchallenged American exceptionalism in financial markets may be entering a more nuanced phase. Source: Reuters / Jamie McGeever, Reuters Open Interest column, August 5, 2026.
Source: reuters.com