Nominal Broad U.S. Dollar Index

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 Nominal Broad U.S. Dollar Index

MOTM_02042023_graph1
Source: Federal Reserve Bank of St. Louis 4

Another reason for U.S. underperformance relative to foreign has to do with technology weighting. Tighter financial conditions and higher interest rates have led investors to shun high P/E growth stocks, many of which reside in the technology sector. At the end of 2022, technology stocks made up about 26% of the S&P 500, compared to about 11% of the MSCI ACWI ex-U.S. index. In recent months, technology has not served as a major drag on foreign returns, as they have in the U.S.

This is good for foreign investors currently as the dollar slides, the USA will have an OK H2 and a better 2004.

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