A Message from the Future

It’s been a tough week in the markets, and I’m sure we’re all feeling a little worse for wear.

So far, the S&P 500 is down about 5% YTD, but more pertinently, it’s down about 9% from a month ago. This means it’s approaching correction territory. The Nasdaq is already correcting, down 13% from all-time highs.

It seems uncertainty around tariffs has sent money rushing out of the U.S. and into just about every other available exchange.

Here are some quick numbers:

• The Euro Stoxx 50 is up about 9% YTD

  • The Global DAX Germany ETF is up about 20% YTD, no surprise considering the government intends to allocate €500 billion in investment over the next few years

  • iShares MSCI Sweden ETF (EWD) is up 17% YTD

  • The French market is up 16% YTD

  • The FTSE 100 (UK) is up 4% YTD

• The Hang Seng Index (Hong Kong) is up around 20% YTD

A very similar geographic rotation happened during the market sell-off at the beginning of 2022. It’s a good reminder that your portfolio should include some international exposure to help ease the pain of market volatility—especially because American markets are so heavily weighted toward growth and technology stocks. According to Morningstar, 29% of its broad U.S. market fund is invested in the technology sector, whereas only 12% of its global market index is allocated there.

If you’ve been following the market or tuning into Stock Club, this isn’t news. Most of the market’s recent growth was fueled by extraordinary gains from the Magnificent Seven and AI-driven hype. We knew valuations depended on positive (maybe even ecstatic) market sentiment and easy access to capital so the minute investors started worrying about tariffs, isolationism, and recession, those stocks sold off hard.

Going back to Morningstar, at the start of January, the U.S. market was estimated to be overvalued by roughly 6%. Pair that with increased volatility from mass retail investor participation, and things were bound to get frothy.

Meanwhile, European and developing markets have remained calmer, with their indexes far more concentrated in banking, manufacturing, energy, and retail. That’s value investor heaven, and at the beginning of the year, European markets were actually considered undervalued, which explains why so many American hedge funds started shifting money overseas.

Essentially, geographic diversification also acts as sector diversification.

That said, the U.S. market’s concentration in technology is exactly what fueled its dominance post-2008. Over the last 15 years, the S&P 500 has trounced the Euro Stoxx 50.

Now, none of this means the U.S. stock market is entering a long-term slump or that we should stop investing in American companies.

There’s definitely value to be found abroad, especially since these markets have less analyst coverage and retail interest, meaning quality businesses can trade at a discount (for more on this, check out Nexus).

But let’s put things in perspective.

The Nasdaq has tripled since the COVID lows. Even after this recent sell-off, it’s still up over 170%. The S&P 500 just had back-to-back 25%+ gain years. In fact, four of the last six years saw gains of at least 25%. Even 2020, with a full-blown market crash, still ended the year up 18%.

And then there was 2022, a year when every single economist was convinced a recession was coming. They were wrong. Markets rebounded, and the investors who stayed in the game came out on top.

It’s easy to forget just how much markets have run. We’re wired to feel loss more intensely than gain—it’s human nature. But just because fear feels real doesn’t mean it’s logical.

These pullbacks happen. They always have, and they always will. If investing felt easy all the time, everyone would be doing it. The reality is, the best opportunities often come when it feels the hardest to buy.

I often think back to 2022, when sentiment was even worse than it is today. That’s when I decided to double down on my OG winner, Netflix, and add it to the Horizon portfolio. I saw it as an opportunity to buy one of my favorite businesses at a 50% discount. And yes, there were concerns, subscriber numbers fell for the first time on record. But many of my favorite aspects of Netflix remained intact, and I had confidence in the management team.

Today, that investment is up 300%.

Markets reward patience. Stay the course.