JPMorgan Predicts This Index Could Outperform S&P 500

JPMorgan Chase predicts that the MSCI EAFE Index, which tracks major stocks from Europe, Australasia, and the Far East, could soon start outperforming the S&P 500 after years of lagging behind.

Analysts Andrew VanWazer and William M. Smith from the investment giant believe that a shift in market dynamics may be underway, marking the end of the S&P 500’s long-standing dominance.

For over 16 years, the S&P 500 has consistently outpaced the MSCI EAFE Index, delivering annual returns of 11.9% compared to just 3.6% for the international benchmark. However, JPMorgan now sees signs that this trend might reverse, especially in light of emerging challenges for the US market.

One of the key turning points, according to the bank’s strategists, was the recent announcement from China’s AI startup DeepSeek, which unveiled a model capable of rivaling top American AI platforms. This news immediately affected the US market’s relative valuation compared to the EAFE Index, dropping it from 55% to 49%, and further declining to 39% as of mid-March.

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JPMorgan’s analysts also point to several factors that could further erode the S&P 500’s edge: economic uncertainties in the US, declining consumer confidence, inflation driven by tariffs introduced during the Trump administration, and the potential resolution of the Ukraine conflict. These elements, they argue, could pave the way for the EAFE Index to take the lead.

Looking ahead, JPMorgan’s long-term capital market assumptions suggest that EAFE stocks may outperform US stocks by 1.4% over the next 10 to 15 years, with projected returns of 8.1% compared to 6.7% for the S&P 500. While some investors have doubted this forecast, recent events highlighting tech sector volatility and trade risks have made the case for EAFE’s potential rise more compelling.

Alexander Stefanov