Don't Count Them Out Yet: Why International ETFs Could Still Outperform in 2026

2026-02-13 15:05:00 ET

I once worked with a seasoned investment advisor who liked to say that when American stocks zig, international stocks tend to zag. It sounds a bit simplistic, but in fact, there's a lot of truth to it.

U.S. stocks tend to outperform international stocks for long stretches, and then the trend reverses. Of course, this inverse relationship is not rock solid. In global recessions, for example, most countries' major stock indexes suffer declines.

But aside from that, there are concrete reasons the two groups -- U.S. equities and non-U.S. equities -- often take turns outperforming. The U.S. economy is the world's largest, and the dollar is the global reserve currency. In addition, U.S. equities account for some 65% of global market capitalization. So with the U.S. stock market so large, the two groups of equities tend to act as counterweights to each other.

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