The United States represents roughly 50% of global stock market capitalization — about $62 trillion out of $128 trillion total at end of 2024. Yet the average American investor holds approximately 78% of their equity allocation in domestic stocks. The math is simple: US investors systematically under-own the other half of the world's productive businesses.

This is not a fringe observation. It is the single largest structural tilt in retail portfolios globally, and it has a name: home-country bias. Source: Siblis Research global market cap data, J.

P. Morgan 2024 Guide to the Markets. Diversification works because assets that move independently reduce portfolio volatility without reducing expected return — the only genuine free lunch in finance.

The S&P 500 and the MSCI EAFE Index (developed markets ex-US and Canada) have a long-run monthly correlation of approximately 0.80 to 0.85.

But over rolling 5-year periods — the horizon that actually matters for portfolio construction — that correlation drops to 0.30 to 0.50, depending on the regime.