In the days following major U.S. holidays, it’s not uncommon to see a rally in the stock market. But recent market behavior has shown a particularly interesting pattern: the lion’s share of stock market gains, especially in the S&P 500, has been happening during U.S. trading hours, rather than in overnight or international sessions. This suggests that it’s primarily American investors who are fueling the upward momentum, while international participants seem more hesitant, adopting a wait-and-see approach.

A Domestic-Driven Rally

When analyzing intraday trading data, one striking trend stands out. Most of the market’s recent gains have not been driven by the so-called “globex” hours — the period when global investors trade U.S. futures outside of American market hours. Instead, the bulk of the upside action has unfolded during the hours when U.S. exchanges are open and domestic investors are most active.

This intraday dynamic points to a market that is being powered largely by confidence in the U.S. economic outlook and corporate earnings. American investors, buoyed by a mix of strong economic data, improving earnings reports, and perhaps a renewed appetite for risk, appear to be stepping in with conviction. In contrast, international investors seem more cautious, possibly taking a more measured approach amid ongoing global uncertainties ranging from geopolitical tensions to divergent monetary policy paths across regions.

Why Might International Investors Be Hesitant?

There are several potential reasons why international investors are less enthusiastic about the recent U.S. rally:

1. Valuation Concerns: After a strong run-up, U.S. equities, particularly in sectors like technology, may appear expensive relative to global counterparts. This could prompt some overseas investors to hold off until better entry points emerge.
2. Currency Considerations: With the U.S. dollar showing resilience, foreign investors face currency risk that can erode gains when repatriating returns. A strong dollar also tightens financial conditions globally, making U.S. assets less appealing to non-dollar investors.
3. Diverging Growth Stories: While the U.S. economy has proven resilient, growth in other major regions like Europe and parts of Asia has been more mixed. Some investors may prefer to stay locally invested or focus on regions where they see undervalued opportunities.
4. Geopolitical Risks: International investors are often more attuned to cross-border risks that may affect global trade, energy markets, and financial stability. This broader risk lens could make them more cautious about chasing U.S. equity rallies.

What This Tells Us About Market Sentiment

The fact that gains are concentrated during U.S. trading hours indicates that the current rally is built on domestic enthusiasm rather than global consensus. This could be both a sign of strength — reflecting localized optimism — and a potential vulnerability, as it highlights a narrower base of support.

If U.S. investors were to become less confident — perhaps due to softer economic data, disappointing earnings, or shifts in Federal Reserve policy — the rally could lose steam quickly, especially without strong international participation to backstop declines.

For now, the domestic story appears compelling enough to sustain upward momentum in U.S. equities. But going forward, broader global participation will be key for a more durable bull market. Watch for signs of increased overnight buying in U.S. futures markets, improved foreign fund flows, and a pickup in risk appetite outside of the U.S. — these could signal a shift from a domestic rally to a more globally supported one.

Until then, the market remains largely a U.S.-driven phenomenon, with American investors leading the charge while the rest of the world watches from the sidelines.