U.S. Stocks Are Having a Rough Start to the Year

• Since early 2025, major European, Asian developed market, and emerging market indexes have all more than doubled the S&P 500's approximately 17% return over that period
• The Magnificent Seven tech stocks, which drove recent U.S. market gains, are now a drag with the Roundhill ETF down over 6% in 2026, while Korea's KOSPI has surged nearly 35% in six weeks on AI-related spending
• Elevated U.S. valuations, economic uncertainty, foreign stimulus measures, and a weakening dollar have contributed to the shift, prompting U.S. investors to look overseas for stronger returns

Summary: U.S. Stocks Underperform Global Markets in 2026

Key Performance Metrics:

U.S. stocks are experiencing their worst start relative to global markets since 1995. The MSCI World ex-USA Index has gained 8.2% year-to-date, outpacing the U.S.-inclusive index by nearly six percentage points. The S&P 500 has posted modest gains, significantly trailing international counterparts.

Market Divergence:

This underperformance began in 2025 when international markets started outpacing U.S. equities. Since early 2025, European, Asian developed, and emerging market indexes have generated returns exceeding double the S&P 500's approximately 17% gain.

Regional Winners:

• Europe: Nearly all major European markets are outperforming the S&P 500, with Belgian, Norwegian, and Turkish benchmarks up double digits. Denmark is the sole exception, weighed down by Novo Nordisk facing competitive pressures in the weight loss drug market.
• Asia: Korea's KOSPI Composite has surged nearly 35% in the past six weeks, driven by chipmakers Samsung and SK Hynix capitalizing on AI-related data center spending.

U.S. Headwinds:

The Magnificent Seven tech stocks, which previously drove S&P 500 records, have declined over 6% this year. These companies, with market caps between $1.5 trillion and $4.5 trillion, have become a drag on the index.

Contributing Factors:

Elevated U.S. stock valuations, geopolitical and economic uncertainty, foreign stimulus measures, and a weakening dollar have driven capital overseas.

Investor Implications:

U.S. investors, traditionally concentrated in domestic equity funds, are increasingly exploring international opportunities as early 2026 returns favor non-U.S. markets.