A chart going around this week deserves a slower read than it will get. Per Yahoo Finance, strip the AI-related stocks out of the S&P 500 and the rest of the US market has actually trailed European stocks. The whole American outperformance story, the one people cite as proof that US stocks are the only stocks worth owning, rests heavily on a handful of companies riding the AI build-out.

I've written before that your S&P 500 index fund is a tech fund in disguise. This is the same point from a different angle. The US market hasn't broadly outperformed. A narrow slice of it has, and that slice has gotten heavy enough in the index to carry the average on its back.

Let me walk through the arithmetic, and let me be clear the numbers are illustrative, not reported figures. Say a handful of mega-cap stocks make up a third of an index, and those stocks rise 40 percent while the average stock in the index rises 8. The index return gets pulled toward the giants, because that's how weighted averages work. You could own 400 perfectly decent American companies and have a year that looks European. Plenty of people did exactly that and wondered what they were doing wrong. Nothing, as it turns out. They just owned the wrong slice of an index that was increasingly a bet on one theme.

Europe, meanwhile, did what Europe tends to do, at least in my read of it over the years: financials, consumer names, dividends, and valuations that rarely make your pulse race. Boring by design, or at least boring by reputation. European stocks haven't become exciting. They're just what's left when you pull the AI thread out of the American sweater.

So what should you do with this information? Probably less than the headlines suggest. If you own a total market fund or a broad international allocation, you already own both sides of this trade, and the rotation between them happens without you lifting a finger. That's the quiet virtue of diversification. It spares you from guessing which theme carries the next decade.

The mistake to avoid is the one I keep seeing, which is looking at ten years of US outperformance and assuming the next ten look identical. That's recency bias wearing a suit. The late '90s taught a version of this lesson, when tech carried everything and then briefly carried nothing. Nobody knows whether AI stocks keep leading or mean-revert, and anyone claiming certainty is selling something.

Practically: if your portfolio is entirely US and entirely tech-heavy by way of the index, you're more concentrated than you probably feel. A slice of international exposure, even a boring European slice, isn't a betrayal of American exceptionalism. It's an acknowledgment that the AI trade is a bet, and bets shouldn't be the whole plan.

Forty years in, I've watched leadership rotate more times than I can count. The losers of one decade were rarely the losers of the next. Usually they were the winners. Patience and a wide net beat a narrow bet on whatever led last time.

The usual disclaimer: I'm sharing perspective, not professional financial advice. Talk to a fee-only advisor before making changes.