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

Key Takeaways

• After years of outperformance, U.S. stocks began to trail the rest of the world last year. That’s continued in 2026.
• Since the start of 2025, major indexes tracking the European market, developed markets in Asia, and global emerging markets have all more than doubled the S&P 500’s return.

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It’s a big year for international sporting competitions, with the Winter Olympics ongoing and a World Cup due this summer. In the stock market, the U.S. is losing badly.

U.S. stocks are off to their worst start to a year relative to the rest of the world since 1995, according to a recent Goldman Sachs note. The MSCI World ex-USA Index, which tracks large-and mid-cap stocks in every developed market except the U.S., is up 8.2% so far this year, nearly six percentage points ahead of the equivalent index that includes the U.S. The S&P 500, the benchmark U.S. equities index, is essentially flat.

Why This Matters to Investors

U.S. investors generally park most of their money in funds that track U.S. stocks—such as those that follow the S&P 500 or other major indexes. This year, some are looking overseas; while it’s hard to know what might come next, early 2026 returns have been stronger outside the 50 states.

After years of outperformance, U.S. stocks began to trail the rest of the world last year. Elevated U.S. stock valuations, geopolitical and economic uncertainty, stimulus measures abroad, and a weakening U.S. dollar all played a part in the reversal of fortunes. Since the start of 2025, major indexes tracking the European market, developed markets in Asia, and global emerging markets have all more than doubled the S&P 500’s approximately 17% return.

The divergence has accelerated this year. All but one major European stock market is outpacing the S&P 500 this year. Belgian, Norwegian, and Turkish benchmarks are all up double digits. (Denmark, the sole outlier, has been weighed down by shares of GLP-1 pioneer Novo Nordisk (NVO), which is feeling the pressure in a fiercely competitive weight loss market.)

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In Asia, Korea’s KOSPI Composite has soared nearly 35% in just the last month and a half. Some of the index’s largest components, including chip giants Samsung and SK Hynix, are riding a surge in AI-related data center spending.

Meanwhile, the tech stocks that led the S&P 500 to a series of record highs over the past year have been a drag on the index in recent months. The Roundhill Magnificent Seven ETF (MAGS), composed of seven tech companies with market caps ranging from $1.5 trillion to $4.5 trillion, is down more than 6% this year.