Foreign equities continue to outperform U.S. stocks this year, but there are signs that international leadership is faltering, based on a set of ETFs through Monday’s close (Aug. 10).
Thanks to a strong rally earlier in the year, the global equity market ex‑U.S. is still ahead of American shares. Vanguard International () is up 15.7% year to date, maintaining a moderate premium over the U.S. stock market’s 14.0% gain via the SPDR S&P 500 ETF (). But the return spread is narrowing, and the recent surge in U.S. stocks could be an early sign that international equities will soon fall behind in relative terms.
A regional breakdown shows that Asia ex‑Japan () is the top performer, rallying 21.5% this year. But the fund has stumbled lately. Japan () is the second‑best performer in 2026 and is trading near a record high, offsetting some of the weakness elsewhere in Asia.
Zooming out and comparing a broad measure of global equities ex‑U.S. (VXUS) with U.S. shares (SPY) suggests that relative strength in international stocks has peaked. The rally favoring foreign over U.S. equities that began more than a year ago has recently reversed, based on the ratio of the two funds. The implication: the long‑running underperformance of foreign stocks may again become the norm.
The second chart below zooms in on the VXUS:SPY ratio’s recent performance. For the first time since the war with Iran began, the 50‑day average for the ratio has slipped below its 200‑day average, indicating that relative weakness in foreign shares may continue in the near term.
The recent soft patch is also evident in emerging markets ().
In a market obsessed with AI‑powered momentum, foreign equities suddenly look like they’re running out of runway. If the crowd keeps betting on America’s tech engine, international leadership may prove to be just another brief detour in a long U.S. bull narrative.