The 'Ex-America' Trade Is Off to a Roaring Start in 2026
•February 18, 2026
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Companies Mentioned
Why It Matters
The divergence signals a potential reallocation of capital toward non‑U.S. markets, reshaping portfolio strategies and challenging the United States’ long‑standing growth engine narrative.
Key Takeaways
- •Global stocks beat U.S. by ~9% YTD
- •MSCI ACWI ex‑U.S. up 8.5% YTD
- •Dollar down 1% YTD, 9% YoY
- •Magnificent 7 drove past U.S. outperformance
- •Investors rebalance away from U.S. concentration risk
Pulse Analysis
The early‑2026 performance gap between U.S. equities and international markets is striking. Goldman Sachs data shows the MSCI EAFE and ACWI ex‑U.S. indices delivering double‑digit returns, while the S&P 500 lags modestly. Currency dynamics play a role; a 1% decline in the dollar YTD and a 9% drop YoY amplify foreign returns when measured in dollars. Yet the bulk of the outperformance stems from genuine earnings growth in Europe and Asia, suggesting that the “Ex‑America” rally is more than a seasonal anomaly.
Underlying this shift are structural changes in the investment landscape. Over the past decade, the U.S. market’s dominance was buoyed by the “Magnificent 7” tech giants, whose outsized earnings lifted the S&P 500. As those drivers plateau and policy uncertainty rises—highlighted by trade‑policy debates and potential tariff escalations—investors are reassessing concentration risk. A weaker dollar further incentivizes capital flows into regions where local currency appreciation can boost returns, while diversified portfolios benefit from reduced exposure to a single economic engine.
For asset managers and institutional investors, the trend underscores the importance of geographic diversification. Allocating to developed‑market ex‑U.S. equities can capture the current upside while hedging against U.S. macro volatility. Moreover, the evolving trade patterns hint at a longer‑term rebalancing, where Europe and Asia may increasingly serve as growth hubs independent of American supply chains. Monitoring policy developments and currency trends will be crucial as the “Ex‑America” trade matures beyond its early‑year momentum.
The 'Ex-America' trade is off to a roaring start in 2026
The ‘Ex‑America’ trade is off to a roaring start in 2026
Global stocks are beating the U.S. by the widest margin since 1995. What’s behind the “Ex‑America” trade?
By Catherine Baab
Published 8 minutes ago
Angela Weiss/AFP via Getty Images
It’s not the “Sell America” trade. Call it the “Ex‑America” trade.
Since the start of the year, global stocks have outperformed the U.S. market by roughly nine percentage points, according to Goldman Sachs.
The S&P 500 is down about 0.5 % year‑to‑date. Meanwhile, the MSCI EAFE Index — which tracks developed markets outside the U.S. — has gained roughly 8 %. The MSCI ACWI ex‑U.S. Index, which excludes American stocks entirely, is up about 8.5 %.
Goldman’s research team notes that this marks the worst start to a year for U.S. stocks relative to global markets since 1995.
What explains U.S. underperformance?
U.S. dollar weakness can make global market performance appear magnified, as returns are affected by unfavorable currency conversion. While the USD has fallen significantly over the last year and since the beginning of 2026, that’s not the whole story. The dollar is down about 1 % year‑to‑date and about 9 % year‑over‑year, suggesting that stock outperformance accounts for the vast majority of gains.
The underperformance of the U.S. market is notable because, by reputation, the United States is considered one of the world’s greatest growth engines. In recent decades, the dominance of Big Tech has helped U.S. returns beat global returns, though U.S. dominance looks somewhat hazier the farther back you measure.
From 2015 to 2025, companies including Nvidia, Apple and Amazon — essentially the “Magnificent 7” — carried the U.S. to the heights of global performance, while Europe and most of Asia lagged badly. Over the longer term, looking back over the last 50 or 100 years, the U.S. figures among the world’s best‑performing markets, though not always the absolute top performer, depending on how returns are measured.
Garden‑variety pullbacks vs. macro deterioration
Statistically, what does early‑year U.S. underperformance indicate? That depends.
Unfolding against a backdrop of steady earnings growth and stable U.S. institutions and foreign relations, the U.S. market often recovers into positive territory, delivering gains for the year.
In more volatile conditions, returns become harder to predict, and “volatile” likely better describes U.S. conditions right now. As former President Donald Trump considers withdrawing from trade agreements, weighs further tariffs on major trading partners, threatens European powers with annexation of territories, and exerts unprecedented pressure on key U.S. institutions like the Federal Reserve, macro and domestic outcomes become far harder to predict.
What’s more, fragmenting trade patterns can spur domestic growth in mature economies across Europe and Asia as countries move away from U.S. imports and focus on producing goods and services more locally. Changing patterns can also spur increased trade that cuts the U.S. out as a source or intermediary. Over time, this can translate to strong market performance within those countries, though such effects are difficult to judge over several months.
In this context, the “Ex‑America” trade may not be mere seasonal noise, but preliminary evidence that global capital is rethinking concentration risk after a decade of U.S. dominance.
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