For more than a decade, U.S. stocks dominated the global investing landscape. From Silicon Valley’s tech boom to record-breaking gains in large-cap growth names, American markets seemed unstoppable.
But 2026 is telling a different story.
According to data highlighted by Market Extra and reported by Joseph Adinolfi, international markets are outperforming U.S. equities — and this may not be a short-term blip. Instead, experts suggest it could mark the early innings of a long-term global rotation.
Let’s break down what’s happening — and what it could mean for investors.
Quick Summary
- Global stocks are outperforming major U.S. indexes in early 2026.
- The MSCI All Country World Index ex-USA has beaten the S&P 500 by nearly 8 percentage points year-to-date.
- ETFs focused on international equities saw over $50 billion in January inflows — a record.
- A weakening U.S. dollar and attractive overseas valuations are key drivers.
- Analysts believe this could be the start of a multi-year global investing cycle.
How Are U.S. Stocks Performing in 2026?
Major U.S. indexes like the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average are lagging behind developed and emerging market peers.
Meanwhile, the MSCI All Country World Index ex-USA has surged ahead, outperforming the S&P 500 by nearly 8% in the first month of the year — its strongest relative start since at least 1996.
That’s not minor underperformance. That’s a structural shift signal.
Investors Are Moving Money Overseas
One of the clearest signs of a trend? Capital flows.
According to Morningstar data, ETFs focused on international stocks attracted more than $50 billion in net inflows in January alone — the largest monthly haul on record.
For comparison, during the post-2008 financial crisis years, global investors poured trillions into U.S. equities. Now, the tide appears to be turning.
The performance gap between the SPDR S&P 500 ETF Trust and the iShares MSCI Emerging Markets ETF has narrowed significantly — signaling emerging markets are gaining strength relative to U.S. large caps.
Why Is This Happening?
1A Weakening U.S. Dollar
The ICE U.S. Dollar Index has fallen nearly 9% over the past year.
Why does this matter?
When the dollar weakens:
- U.S. assets become less attractive to foreign investors.
- Overseas returns look stronger when converted back to dollars.
- Emerging markets typically benefit.
Historically, periods of international outperformance often coincide with dollar weakness — and sentiment surveys show investors are more bearish on the dollar than at any point since 2012.
2More Attractive Valuations Abroad
Valuation is becoming a deciding factor.
The S&P 500 trades at a forward price-to-earnings ratio above 22. In comparison:
- Hong Kong’s Hang Seng: ~11
- Brazil’s Bovespa: ~10
- South Korea’s KOSPI: ~9–10
For value-conscious investors, that’s a compelling gap.
After years of U.S. multiple expansion driven by mega-cap tech, global diversification now looks appealing.
3A More Multipolar Global Economy
The global investment landscape is evolving.
Countries like India, South Korea, and Brazil are strengthening domestic capital markets. European nations are increasing fiscal spending, particularly in defense and infrastructure.
Investors are increasingly discussing a “multipolar world” — where growth isn’t centered solely in the United States.
Is the U.S. Market in Trouble?
Not necessarily.
Analysts still expect earnings growth to broaden across U.S. companies in 2026. Small-cap and value stocks are showing renewed momentum. And foreign investors still own approximately $27.6 trillion more in U.S. assets than Americans own abroad.
The U.S. remains the world’s largest and most liquid capital market.
But dominance may no longer be automatic.
Could This Be a Multi-Year Trend?
History suggests that once international markets begin outperforming, the cycle can last years — not months.
After the 2008 crisis, U.S. equities led for over a decade. If cycles tend to swing, we may now be witnessing the early stages of global rebalancing.
As one portfolio manager put it: this may not be a five-year cycle — it could be a career-long shift.
What Should Investors Consider?
If you’re reviewing your portfolio in 2026, here are key questions:
- Are you overexposed to U.S. mega-cap tech?
- Do you have emerging market diversification?
- Are you positioned for dollar weakness?
- Are valuations part of your decision-making process?
Global diversification may no longer be optional — it may be essential.
Final Thoughts
For years, betting on America was the safest strategy in global markets. But markets move in cycles.
With a weakening dollar, cheaper international valuations, record ETF inflows, and shifting geopolitical dynamics, 2026 could mark the beginning of a new era — one where global equities reclaim leadership.
The shift may just be getting started.
#GlobalMarkets #StockMarket2026 #EmergingMarkets #DollarWeakness #InvestmentStrategy