Introduction to Global Stock Outperformance

In 2026, US investors face a pivotal shift: global stocks are poised to continue their impressive rally, potentially outpacing the S&P 500. After surging over 28-32% in 2025—far exceeding US returns of 16-17%—international markets offer compelling opportunities, especially in artificial intelligence (AI)[4][5]. This isn't a fleeting trend; factors like a weakening US dollar, attractive valuations, and AI's global proliferation make watching ex-US equities essential for diversified portfolios.

As AI reshapes industries worldwide, non-US regions are catching up, providing US investors with high-growth potential beyond domestic giants. This blog explores why global stocks matter in 2026, blending finance strategies with AI-driven insights.

2025 Recap: Global Stocks Steal the Show

International equities delivered blockbuster returns last year, signaling the end of prolonged US dominance. The S&P Global Ex-US Broad Market Index climbed more than 28%, while developed ex-US and emerging markets gained 31% and 20%, respectively[4]. Morningstar's Global Markets ex-US Index rose 32% in USD terms, dwarfing the US Market Index's 17%[5].

This outperformance stemmed from:

• A weaker US dollar, boosting returns for US investors in foreign assets[7][9].
• Diversification amid US AI hype and high valuations[1][8].
• Strong regional momentum in Europe, Japan, and emerging markets[3][4].

Early 2026 data shows the best start for foreign outperformance since 1995, with Germany, South Korea, and international small-cap value beating the S&P 500 over five years[7]. For US investors, ignoring this shift risks missing alpha in a choppy year.

Key Drivers of Global Outperformance in 2026

Weaker Dollar: A Tailwind for US Portfolios

The US dollar's decline—down nearly 9% in 2025—supercharged international returns[9]. Forecasts suggest prolonged cyclical weakness, not a secular drop, enhancing USD-denominated gains from global stocks[5]. A softer dollar means each foreign currency unit converts to more dollars, amplifying AI and tech plays abroad.

Attractive Valuations Outside the US

US stocks trade at elevated multiples (S&P 500 forward P/E in low 20s), while international indexes offer discounts and higher dividends[8]. The US comprises 62% of global equity value despite 25% of GDP—a historical extreme[5][8]. Emerging markets like Brazil, China, Mexico, India, and developed Europe/UK remain undervalued with upside[5].

Diversification Beyond US AI Concentration

US market concentration is extreme: top 10 S&P 500 firms hold 40% weight[8]. AI dominance has inflated valuations, prompting capital rotation to global opportunities[4]. International exposure hedges US politics, debt, and policy risks[5].

AI's Global Expansion: The 2026 Game-Changer

Artificial intelligence isn't a US monopoly. While American firms lead, global adoption accelerates in 2026, fueling non-US outperformance.

AI in Emerging Markets

China's AI infrastructure investments position stocks like Alibaba for e-commerce and cloud growth (international segment up 20%+)[10]. India's lagging 2025 performance sets up a rebound via AI-driven tech services[4]. Mexico and Brazil benefit from nearshoring and AI manufacturing[5].

Emerging markets boast higher per-capita growth, prudent fiscal policies, and AI tailwinds, potentially outpacing US equities[4].

Europe's AI and Tech Renaissance

Western Europe offers AI, defense, healthcare, and IPO plays at discounts[4]. Continental Europe trades reasonably, with AI integration in autos, industrials, and semiconductors[5].

Asia's AI Powerhouses

Japan's TOPIX eyes 7% gains from reforms and AI[3], while South Korea outperforms via semiconductors and AI hardware[7].

Goldman Sachs predicts sturdy 2.8% global growth, with US at 2.6% but international catching up via AI efficiencies[6].

Why US Investors Must Act in 2026

Portfolio Complement with International ETFs

US-heavy portfolios (common for Americans) benefit from international ETFs. They add diversification, lower correlation, and cycle-hedging[1][9]. Fidelity notes unsynchronized business cycles: China/Europe earlier-stage than US, supporting earnings[9].

Risks of US-Only Exposure

Despite Morgan Stanley's bullish S&P 500 call (to 7,800, +14%), global peers lag less dramatically[3]. Bubble warnings and AI cooldown risks loom[2][4]. America First policies may spur US outflows[4].

Historical Cycles Favor Rotation

The 1970s-2000s rewarded global exposure for US investors[5]. 2026's dollar weakness and valuations echo these periods[7][8].

Actionable Strategies for US Investors

1. Allocate to Key International ETFs

Incorporate low-cost ETFs tracking:

• S&P Developed Ex-US BMI (Europe/Japan AI/tech).
• S&P Emerging BMI (China/India AI growth).
• Small-cap value ex-US (outperforming S&P over 5 years)[7].

Sample Portfolio Adjustment:

2. Target AI-Driven Global Stocks

Focus on:

• Europe: ASML (semiconductors/AI chips), SAP (enterprise AI).
• Asia: TSMC (Taiwan AI hardware), Samsung (Korea AI/memory).
• Emerging: Alibaba (China AI/cloud), Infosys (India AI services)[10].

3. Currency and Timing Tactics

Hedge dollar weakness with unhedged ETFs. Enter during US pullbacks, as international offers 'buy low' amid AI ramp-up.

4. Monitor Macro Signals

Watch ECB/BOE rate cuts weakening euro/pound[3], Trump tariffs[6], and AI earnings from non-US firms.

Potential Roadblocks and Mitigations

• US Policy Boost: Tax cuts/deregulation favor S&P[3][6]. Mitigation: Limit overweight to 50% US.
• China Reflation Slowness: Headwinds persist[3]. Mitigation: Diversify to India/Brazil.
• Choppy Dollar: Rebounds possible[3]. Mitigation: Use currency-hedged options sparingly.

S&P Global sees global rally continuation, US possibly regaining lead—but international strong[4].

Building a Future-Proof Portfolio

In February 2026, global stocks intertwined with AI offer US investors resilience and growth. Start small: 10-20% international allocation, emphasizing AI hotspots. Rebalance quarterly, tracking dollar and earnings.

This approach captures 2025's momentum into 2026, balancing finance prudence with AI excitement. Diversify strategically—your portfolio will thank you amid rotating leadership.

Final Thoughts on 2026 Opportunities

Global outperformance in 2026 hinges on AI's borderless march, valuation gaps, and dollar dynamics. US investors ignoring this risk over-reliance on a concentrated market. Embrace the shift: research ETFs, pick AI winners, and position for cycles. The ex-US trade is working—make it yours.