Going global hasn’t paid off for U.S. investors for the past 10 years, but this dynamic may be set to change soon.

With the S&P 500 up 20% this year, outperforming markets in other parts of the world, investors are again asking why I continue to recommend staying globally diversified. For the past 10 years, U.S. stocks have beaten non-U.S. stocks by an average of five percentage points a year. That’s a lot.

For a number of reasons, however, we may have reached a turning point in that dynamic. Indeed, European stocks have outperformed the U.S. in local currency terms over the past 12 months. But the near record-high dollar has obscured the turnaround for many U.S. investors. 

Below are five reasons why non-U.S. stocks more broadly may soon start to outperform U.S. equities: 

  • Weak economic growth may have bottomed in many parts of the world. Even as data has worsened in China, Europe and Korea, the rate of deterioration has slowed, and stock prices have generally been stable, suggesting room for improvement. In contrast, the U.S. faces weaker economic fundamentals.

  • Key policy moves could be positive catalysts. Prospects for a China trade deal and more Fed easing are catalysts that could benefit non-U.S. stocks, especially emerging markets, as I wrote recently. Meantime, political uncertainty is increasing in the U.S.

  • The weakening dollar may reverse currency-related headwinds for U.S. investors who own foreign stocks. Recently, the dollar has been weakening against a basket of foreign currencies, a trend that I expect to continue, which could be a tailwind for non-U.S. stocks.

  • Large-investor ownership of non-U.S. stocks is very low. Like individual investors, hedge funds and other institutional investors have also avoided foreign stocks. When that trend reverses, demand for non-U.S. equities could lead to additional gains.

  • Non-U.S. stocks are inexpensive. Many overseas markets appear to have fully priced in a global recession. The average price-to-book ratio of European equities is at a 40-year low. Price-earnings ratios are low historically in Europe, emerging markets, Japan and the UK. Low prices in non-U.S. stocks could lead to a strong rebound, if the global economy improves next year. 

It’s important for investors to watch the news flow to make sure policy trends don’t reverse. But the way things look now, adding an actively-managed global stock fund to your portfolio could make sense.