US stocks have set new records this year while Australia's benchmark S&P/ASX 200 Index (ASX: XJO) has barely risen.
The S&P 500 Index (SP: INX) is up 9% in the calendar year to date (YTD) and hit a record 7,620.9 points on 2 June.
The Nasdaq Composite Index (NASDAQ: .IXIC) reached a new peak of 27,190.21 points on 1 June, and is up 13% YTD.
The Dow Jones Industrial Average (DJX: .DJI) touched a new high of 52,281.19 points on 17 June, and has lifted 8% YTD.
Meanwhile, at the time of writing, ASX 200 shares have risen by less than 1% in 2026.
Here's why.
Image source: Getty Images
US stocks are smashing ASX shares in 2026
Drew Meredith, a principal advisor at Wattle Partners, says the performance gap can be attributed to artificial intelligence (AI).
In an article on The Golden Times, Meredith explained:
The United States market is being driven by a small number of companies with outsized earnings power, almost all tied to artificial intelligence infrastructure.
Nvidia, Microsoft, Alphabet, Meta, and Amazon have delivered earnings growth that justifies, at least in part, the premium valuations US indices now carry.
Meanwhile, ASX shares are being held back by several elements that have little to do with the quality of our listed companies.
Meredith says:
The Federal Budget's CGT reform package has weighed on sentiment in financial stocks, property, and healthcare.
The US-Iran conflict has created energy price uncertainty that hurts an economy reliant on stable commodity exports.
The Australian consumer sector is also weak, with confidence falling to one of its poorest levels in 50 years last month.
On top of that, the ASX does not have many companies exposed to the AI earnings cycle in the same way that the US markets do.
Our tech sector is pretty small. In fact, tech shares comprise just 2.1% of the ASX 200.
Should you buy US stocks?
Meredith warns against chasing performance, commenting:
If you are sitting with a predominantly Australian portfolio watching the gap widen, you are probably feeling a pull to do something.
That pull is understandable. It is also the thing most likely to cost you money.
Meredith explains a phenomenon called "recency bias".
When one market dramatically outperforms another for two or three years, investors feel they were wrong to be diversified. That feeling is not evidence. It is recency bias.
The periods of sharpest US outperformance relative to global peers have consistently been followed by periods of mean reversion.
This happened after the dot-com peak in 2000. It happened in the early years after the GFC when US banks were recovering and Australian miners were printing money.
It does not happen on a schedule you can predict, which is precisely why systematic diversification matters more than tactical shifts.
'Mean' is a statistical term for 'average'. Mean reversion is the idea that share prices don't stay unusually high or low forever. They tend to move back toward their historical average over time.
How switching from ASX shares to US stocks will cost you
One of the biggest reasons not to switch from underperforming ASX shares into outperforming US stocks today is the tax implications.
Meredith, a retirement wealth specialist, explains it this way:
For many retirees who built their Australian equity positions over decades, switching from Australian to global exposure carries a meaningful capital gains tax cost.
Selling a long-held parcel of BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), or CSL Ltd (ASX: CSL) to buy more Vanguard MSCI Index International Shares ETF (ASX: VGS), Global X Fang+ ETF (ASX: FANG), or iShares S&P 500 AUD ETF (ASX: IVV) is not a free transaction.
If those shares have large embedded gains and you are selling them in a year where the CGT discount is already under political threat, the timing adds an additional layer of risk.
What should you do?
Meredith said investors shouldn't sell ASX shares while they're soft today to buy US stocks at a cyclical high.
You may end up paying a big CGT bill for what will become a diminishing performance gap as US stocks undergo mean reversion.
The most prudent step is to check how your portfolio's composition has changed this year.
Meredith advises:
Check your allocation. Not your recent returns, your allocation.
If your target was 40 per cent Australian equities, 25 per cent global equities, 20 per cent fixed income, and 15 per cent cash two years ago, what is it now?
If market movements have drifted you significantly off target, a disciplined rebalance to target is reasonable. That is not performance chasing. It is maintenance.
If you have cash to invest and want more global exposure, a regular contribution into the plethora of global ETFs could be an option.
