Thornburg Urges Move to International Stocks Amid US Tech Rally

Thornburg Investment Management recommends investors consider international equities after reporting that only about one-third of S&P 500 companies have outperformed the index so far in 2026, the smallest proportion in over 35 years. The firm published the findings in a mid-year outlook dated July 22, linking much of the U.S. market’s gains to a small group of large technology companies tied to artificial intelligence spending.

In the report, Matt Burdett, Thornburg’s head of equities, wrote that construction of data centers for AI is responsible for roughly half of U.S. economic growth this year. The report states that removing that spending leaves broader domestic activity-often called Main Street-expanding at about a 1% annual pace, closer to growth rates in parts of Europe than to the roughly 2% headline U.S. rate.

The report highlights that major cloud and AI firms including Microsoft, Amazon and Alphabet plan to direct much of their 2026 cash flow to data centers and related equipment. Those companies have also become among the largest corporate bond issuers this year, the report notes.

Thornburg points to valuation differences as a reason to look abroad. On an equal-weighted basis, international stocks trade at about 14 times projected 2027 earnings versus roughly 17 times for U.S. equities, the firm reports. When the largest technology companies are removed from the U.S. calculations, reported earnings growth between U.S. and international markets appears more similar, the document says.

Dividend income is another factor in Thornburg’s view. The firm reports that dividend yields on foreign stocks typically run 2 to 3 percentage points higher than yields on comparable U.S. companies. Thornburg cites two active funds that use stock selection rather than index tracking: the Thornburg International Equity ETF (TXUE) and the Thornburg Premium Income Builder ETF (THOR). The THOR fund is described as focused on generating income from higher dividend yields available outside the United States.

The report also notes that global trade held up as U.S. tariff policy shifted. Gross exports rose year over year between April 2025 and March 2026 in economies such as Vietnam, South Korea, Germany and the United Kingdom, the firm reports.

Thornburg contrasts the recent U.S. rally with past recoveries. The S&P 500’s second-quarter gain ranked as the fourth-largest quarterly advance in market history, but the report says that rally began from an already elevated market level rather than from a clear market bottom.

The report concludes that active stock selection in international markets can avoid weaker companies and capture higher-yielding names that passive international benchmarks may not emphasize.