Here are a few numbers worth sitting with.
So far in 2026, the S&P 500 is up around 14% and the NASDAQ around 15%. The Australian market? Closer to 4%. Stretch the comparison out over five years and the story becomes harder to ignore. The S&P 500 has delivered roughly 12% per annum in price growth, while the ASX 200 has managed less than 4% per annum.
Different indices, currencies and whether dividends are included can change the precise numbers. But they don’t change the underlying story: Australian equities have been comprehensively outpaced by the US market. And if your investment portfolio has a strong home-country bias, that gap has quietly been working against you.
Why Does Australia Keep Falling Behind?
The simple answer is that we don’t have enough of what the world has been buying.
The past five years have been dominated by technology, digitization, and, more recently, artificial intelligence. Think Nvidia, Microsoft, Alphabet, Amazon, and Meta.
These aren’t simply technology companies anymore. They’re increasingly providing the computing power, cloud infrastructure, data, and platforms underpinning the next phase of the global economy. That has translated into enormous earnings growth and, unsurprisingly, enormous investor interest. AI-linked earnings have been a major contributor to recent US outperformance.
Australia doesn’t have anything comparable at scale. Our market is dominated by banks and miners, supported by supermarkets, healthcare and other traditional industries.
There is nothing inherently wrong with that. We have some excellent businesses. But there’s a difference between owning companies that finance the economy and owning companies that are actively reshaping it. And right now, that distinction matters.
Australia’s Market Has Another Problem: Concentration
Ironically, Australians sometimes think investing locally is the conservative option. But the ASX is actually quite concentrated.
A relatively small group of banks and resource companies account for a significant portion of the market. That means an investor who owns predominantly Australian shares is making a bigger bet than they may realise on a handful of themes: Australian housing, banking profitability, commodity prices, and China’s demand for resources. That’s not necessarily bad. But it isn’t particularly diversified either.
But What About Dividends?
This is where Australia deserves some credit.
Australian companies have traditionally paid strong dividends, and franking credits provide an additional benefit that headline index comparisons don’t fully capture. For retirees and income-focused investors, that can be extremely valuable. Once dividends and franking are included, the performance gap between Australia and international markets narrows.
But it doesn’t disappear. And that’s the important distinction.
Dividends are not a substitute for growth. They’re a complement to it. A portfolio needs income today, but it also needs capital growth to protect purchasing power tomorrow.
Familiarity Isn’t the Same as Opportunity
Home-country bias is one of the most understandable investment behaviours.
Australians know Commonwealth Bank. We know BHP. We shop at Woolworths. We hear about the ASX every night on the news. Owning them feels comfortable.
But comfort can become expensive.
Australia represents only a small slice of the global equity market. Restricting most of your investment capital to our shores means ignoring thousands of businesses and entire industries that simply don’t exist here at meaningful scale. That includes much of the world’s technology, semiconductor, luxury goods, aerospace, pharmaceutical and advanced manufacturing sectors. Why voluntarily exclude yourself?
This Isn’t About Chasing Yesterday’s Winners
There is an important caveat.
The answer isn’t to look at five years of US outperformance and blindly pile into American technology stocks. That would simply replace one concentration problem with another. US valuations are elevated in parts of the market, and the extraordinary performance of the largest technology companies has created concentration risks of its own. Yesterday’s winner doesn’t automatically become tomorrow’s winner.
Which brings us back to diversification.
Think Global First
For Australian investors, perhaps the biggest mindset shift is this:
A modern portfolio shouldn’t necessarily be an Australian portfolio with some international shares bolted onto the side. It should be a global portfolio with an appropriate allocation to Australia. Australian equities can still play an important role – particularly for dividends, franking credits, and exposure to resources. But they should be part of the portfolio rather than automatically becoming the portfolio. Because investing isn’t a patriotic exercise. There are no bonus points for owning more Australian shares simply because we happen to live here.
The Numbers Are Telling Us Something
None of this means Australia is destined to underperform forever.
Markets move in cycles. Resources will have their moments. Banks will have theirs. And there will inevitably be periods when Australian equities outperform global markets. But the structural differences between Australia and the rest of the world aren’t disappearing.
Technology. AI. Healthcare innovation. Semiconductors. Advanced manufacturing. Global consumer brands. Much of that opportunity sits offshore.
So rather than asking whether international markets have already run too hard, perhaps the better question is: How much of your financial future do you really want tied to one relatively small market? If you haven’t reviewed your geographic allocation recently, the numbers suggest it might be time. Sometimes the biggest portfolio risk isn’t what you own. It’s what you’re missing.