Since 2011, U.S. stocks have consistently outperformed, prompting many investors to ask questions like:

It's a fair concern.

When one part of your portfolio seems to do most of the heavy lifting, it’s easy to question the value of everything else.

But this thinking overlooks the true purpose of diversification, especially in retirement.

Why Diversification Feels Broken

It's been roughly 15 years of significant U.S. market dominance.

The S&P 500 has comfortably outpaced most international indices, leading many to doubt the wisdom of diversification.

But this view misses a critical global perspective.

If you’re an investor in Canada, Japan, the UK, or Germany, diversification has clearly worked.

Why?

Because U.S. stocks have been the diversifier, and they've dramatically improved returns for foreign investors.

Viewed this way, U.S. market dominance actually strengthens the case for diversification rather than undermining it.

Many investors have forgotten that diversification is not, and never has been, a strategy for maximizing returns.

It’s a strategy for managing risk, behavior, and uncertainty.

Proper diversification helps us avoid chasing what’s hot while also preparing us for whatever may happen next.

This is important because history is a story of cycles, reversals, and unexpected turns.

If you’re concentrated in one market when the music stops, things can go very wrong very quickly.

Diversification can help us avoid this situation.

International Stocks Are Gaining Ground

In 2025, we're witnessing a shift: international stocks are outperforming U.S. stocks.

Better valuations abroad, improving earnings growth, and attractive dividend yields have begun to narrow the performance gap.

At the same time, many U.S. stocks remain among the world’s most expensive by traditional metrics.

While this isn't a forecast of imminent collapse, it's a reminder that markets move in cycles, and the future doesn’t always look like the past.

Outperformance can’t last forever, and trees don’t grow to the sky.

As people wonder whether the U.S. stock market will reassert its dominance in the coming decades, the only honest answer is:

It might, but it might not.

But that’s the beauty of diversification.

We don’t need to know.

When one asset class zigs and another zags, diversification smooths out the ride, which matters much more than most investors realize.

Bottom Line

To diversify is to say:

In this way, diversification is a position of strength, not weakness.

So if you've started questioning the value of holding international stocks, small caps, or bonds, remember this:

The very reason diversification feels unnecessary today is because something else has done so well for so long.

But that’s precisely how imbalance builds, which is how investors can find themselves overexposed when the tide inevitably turns.

In summary, we don’t diversify because we know what will happen.

We diversify because we don’t.

We should never forget that.

📚 What I've Been Reading

• Very Bad Advice (Morgan Housel)
• The 'First Year of Retirement' Rule (Kiplinger)
• Older Americans Misjudge Their Financial Literacy (The Conversation)
• How Do You Know When You Were Wrong About An Investment? (Polymath Investor)
• Ecosystems Come and Go (Seth Godin)
• Taking Predictable Vacations Is Bad For Your Brain (Bloomberg)

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Stay wealthy,

Taylor Schulte, CFP®