U.S. is still 'exceptional' despite rest of world outperformance this year, Apollo's Marc Rowan says

Apollo Global CEO Marc Rowan contends that while the U.S. stock market, with the S&P 500 up approximately 4% in 2025, trails global peers like Germany (+30%) and China (+18%), American exceptionalism endures. He characterizes the U.S. market as transitioning from 'hyper exceptional' to 'merely exceptional' due to its concentrated tech sector gains, suggesting some capital may flow abroad. Nevertheless, Rowan asserts the U.S. remains the most compelling investment destination for institutional investors, citing its robust technology sector and relative stability as the 'cleanest dirty shirt' compared to other major economies, with the S&P 500 recently nearing an all-time high driven by tech and semiconductor outperformance.

Analysis

According to Apollo Global CEO Marc Rowan, the U.S. stock market is undergoing a transition from a period of "hyper exceptionalism" to one that is "merely exceptional," despite underperforming global markets year-to-date. The S&P 500's gain of just over 4% in 2025 significantly trails the nearly 17% rally in the iShares MSCI ACWI ex US ETF (ACWX), as well as surges in German (+30%) and Chinese (+18%) equities. This performance gap is attributed to a marginal shift in capital flows as investors diversify away from a U.S. market previously characterized by extreme tech concentration, where ten stocks constituted 40% of the S&P 500 at a 60 P/E ratio. Nevertheless, the U.S. market's fundamental appeal remains intact, evidenced by the S&P 500's recent rebound to near its all-time high. This resilience is almost entirely driven by the technology sector, with Information Technology and Communication Services rallying 21% and 15% this quarter, respectively. Semiconductor stocks have been particularly strong, with the VanEck Semiconductor ETF (SMH) up over 30% and Nvidia (NVDA) surging more than 40% in the same period. Rowan concludes that despite fiscal and geopolitical risks, the U.S. remains the most compelling investment destination compared to Europe and China, describing it as the "cleanest dirty shirt" due to its relative strengths.

Key Decisions for Investors

• While maintaining a core strategic allocation to the U.S. market, investors should consider the recent outperformance of international equities (ACWX) and the potential for marginal capital outflows from the U.S. as a signal to tactically diversify into select global markets.
• Given that U.S. market strength is heavily concentrated in technology, exposure should remain tilted towards high-performing segments like semiconductors (SMH), which continue to drive the S&P 500's gains despite broader market underperformance.
• Investors should closely monitor the high valuations and concentration risk within the top U.S. technology stocks, as the described shift from 'hyper' to 'merely' exceptional could precede increased volatility or a market rotation away from these leaders.
• Acknowledge the 'cleanest dirty shirt' thesis, which suggests that long-term U.S. holdings are favorable on a relative basis, even if absolute returns moderate and risks such as the fiscal deficit persist.