Global Equity Leadership: Early signs of a shift

The relative performance of global equities versus the US has been in decline since 2008, reflecting a prolonged period of US market dominance. This phase was supported by easy liquidity, low interest rates, technology-led earnings concentration, and sustained US dollar strength.

Recent market action suggests this regime may be nearing exhaustion. After a multi-year downtrend, global equities relative to the US have stabilised and begun to form a base, with early signs of a break from the long-term trend. Historically, such transitions signal a gradual broadening of leadership rather than an abrupt reversal. US equities may continue to generate returns, but the period of clear relative outperformance appears to be fading.

This setup is more comparable to the early stages of the 2003–04 cycle than to the post-2009 period. In such environments, global capital typically rotates beyond a narrow set of winners, favouring markets linked to domestic demand, manufacturing, capex, and real assets.

Indian equities are well placed in this context. Growth is supported by domestic consumption, financial deepening, and an improving manufacturing ecosystem, reducing dependence on a single global trade cycle. Historically, India has tended to perform better during periods when global equity leadership broadens. That said, the transition is unlikely to be linear. Higher interest rates and currency volatility can drive short-term corrections and sharper sector rotation.

In this environment, active management with clear sector positioning becomes critical. Broad market exposure alone may be insufficient, while disciplined stock selection aligned with domestic growth drivers and valuation discipline is likely to determine outcomes in the next phase of the cycle.

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