Who Needs Silicon Valley When You Can Buy Spanish Banks?

The table below shows the 2025 return of each of the 50 global stock markets we track, from the perspective of a USD investor. My guess is that many of you will be surprised by the US clocking in at 38th, and even more surprised by the countries near the top.

Remember when Spain and Greece were ridiculed on a daily basis for being so fiscally irresponsible that they almost took down the Euro? That wasn’t very long ago! According to the IMF, South Korean RGDP growth for 2025 was an unimpressive 0.9%. South Africa has the worst income inequality in the world as measured by the Gini index (and Colombia is 7th worst). And yet all of them crushed the US, which has the largest and most profitable companies in history. What is going on?

The answer is that profits are not the same as equity returns. It matters what you pay for those profits. If you pay rock-bottom prices for mediocre companies operating in mediocre economies, you can do great. And vice versa. When we run our equity process on some of the glitziest companies in the US, our assessment is that prices are so high that not even their incredible profitability can hope to produce satisfactory long-term returns.

Here’s a simple thought experiment that illustrates the point. Imagine I invent a game. You flip a coin. If it’s heads, you win 100 bucks. If it’s tails, you win 10 bucks. What a great game for you, it reliably throws off cash just like the darlings of the US stock market. The only catch is that you have to pay to flip the coin. If it costs 10 bucks to flip it, you are going to get rich. If it costs 60 bucks to flip it, things are going to end badly for you. It’s the same stream of cash flows in both cases, but the price you pay for that cash is everything.

Shameless plug: identifying where you can underpay for earnings is not easy, but it is not impossible. It takes a sharp pencil and a deep understanding of the drivers of returns. In our equity strategy in 2025, the countries we were overweight had a weighted average return of 41% and the countries we were underweight only made 23%, so we materially outperformed US and Global indices. Our strategy will be available to the public soon as an ETF, please let me know if you want more info.