Money Matters: We all have hometown bias

We all have a hometown bias.

The local pizza shop has the best sauce in America. The whole city has the local team on the TV on Sunday. And if someone from your area ends up on Dancing with the Stars, congratulations. You’re now emotionally invested in ballroom dancing.

Money works the same way.

Our collaborative advisory experience helps align your assets with your goals and personal values, regardless of where those assets are held. Oftentimes, that means sitting with a client and reviewing their 401(k). Everything tends to go smoothly at first, allocating dollars to U.S. large cap stocks, U.S. mid cap stocks, and U.S. Aggregate Bond funds. But then we get to “International Equity” and there’s a small scowl followed by, “Really? International?” We’ve heard that groan many times. And for most of the last decade, it made sense. Through the end of 2024, the S&P 500 outperformed international markets in 9 of the past 11 years. When the home team keeps winning, why would you expect anything else?

Then 2025 showed up and, to many people’s surprise, the home team lost.

As of December 31st, the MSCI EAFE (International Developed Markets) outperformed the S&P 500 by more than 10%. The MSCI Emerging Markets Index outperformed by more than 14%. After years and years of the same outcome, we as humans fall victim to recency bias. What has been happening will continue to happen. Is this a new era? Maybe. Or maybe it’s just one year. We’ve seen this before, though. In the early 2000s, international markets outperformed the U.S. every single year from 2002 through 2007. Then the U.S. took over and ran the table for more than ten years. This is why we diversify.

Not because every part of your portfolio performs well every year, but because no one knows which part will perform well next. Our job isn’t to predict the future. It’s to help you earn a rate of return sufficient to meet your goals without betting everything on one country, one market, or one story.

You can’t control what the markets do, but you can build a plan that succeeds in all types of environments, even when it’s away from home.