Earlier this month I discussed the possibility that the US stock market’s year-to-date performance would slip to second place as Africa shares rallied. Nearly two weeks later, the switch is complete, based on a set of proxy ETFs.

It’s debatable if this leadership change will resonate as a longer-term phenomenon. One reason for skepticism: Africa stocks (AFK) are rebounding from an extended two-year slump and so year-to-date comparisons obscure longer-run underperformance vs. the US market.

But for the moment, American shares (SPY) have lost bragging rights as the world’s leader via the ETF list below. VanEck Africa Index ETF (AFK) closed on Friday (Aug. 23) with a 20.0% total return this year, edging out a 19.0% rise for SPDR S&P 500 (SPY).

To be fair, you can find any mix of leaders and laggards you prefer on the global stage by changing the trailing time window and tickers. There’s nothing special about year-to-date results. Over longer periods AFK is no match for SPY’s red-hot rise.

On a more fundamental level, the leadership change this year in favor of AFK may reanimate the topic of international diversification. From a US-investor perspective, owning foreign shares in recent years has incurred a non-trivial opportunity cost. Consider the time window since the end of 2019: SPY is up a cumulative 88% vs. a relatively paltry 30% for Vanguard Total International Stock ex-US (VXUS).

The case for holding a global equity portfolio vs. a heavily US-skewed one is one of emphasizing diversification and harvesting higher risk-adjusted results. But the core argument for going global has suffered in recent years as foreign returns overall have lagged and the correlation between US shares and offshore stocks has increased.

The case for international diversification isn’t dead, but it’s clearly taken a hit. The numbers may no longer be persuasive, but there’s still a case for at least holding some amount of foreign stocks as a compliment to US shares. The key argument boils down to hedging uncertainty. Betting the farm on US superiority as a rule written in stone may be persuasive in the rear-view mirror, but it’s problematic when you factor in the inability to see into the future.

As a first approximation of what the longer-run may bring in terms of performance, CapitalSpectator.com’s ex ante modeling suggests that it’s premature to dismiss the potential for stocks in emerging and developed markets ex-US.

That’s nowhere near a guarantee, of course. It’s entirely possible that US stocks will continue to outperform for an extended period. Ditto for the US dollar, which needs to stay strong in some degree to keep the global comparisons favor to America shares. But a calculated risk view suggests that keeping some skin in the international diversification game still has merit vs. the extreme view of sticking exclusively with the US.

That’s a contrarian view. But when the crowd’s generally convinced it’s right in the extreme, therein lies opportunity, or so history implies.

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