Introduction
In early 2026, strategists at JPMorgan presented a confident view that international equities still offer meaningful upside potential despite years of U.S. market dominance. After a prolonged period when American large cap technology companies captured the bulk of global investor attention, capital is increasingly flowing toward markets outside the United States. According to JPMorgan’s global equity strategy team, this shift is not temporary noise but part of a broader structural rotation supported by improving macroeconomic conditions, attractive valuations, earnings resilience, and supportive currency trends.
For more than a decade, U.S. equities outperformed most global peers, driven by innovation in technology, deep capital markets, and strong corporate profitability. However, cycles in global markets are rarely permanent. JPMorgan argues that the current environment reflects a recalibration of investor expectations.
A Balanced Global Growth Environment
A central pillar of JPMorgan’s optimism is the current macroeconomic backdrop. The global economy appears to be experiencing a balanced expansion characterized by moderate growth and easing inflation pressures. This type of environment is often described as favorable for equities because companies can grow earnings without facing excessive input cost pressures or aggressive monetary tightening.
Economic activity indicators in several developed and emerging regions show resilience. Manufacturing surveys have stabilized, service sector demand remains steady, and consumer spending, while not explosive, continues to support corporate revenues. Inflation, which surged in previous years due to supply chain disruptions and commodity shocks, has moderated in many economies. This moderation provides central banks with greater flexibility in managing interest rates.
When inflation is contained and growth is steady, interest rates tend to stabilize or even decline. Lower or stable rates reduce borrowing costs for companies and support equity valuations by making future earnings more attractive relative to bond yields. JPMorgan’s outlook suggests that this macro balance could continue to provide a supportive backdrop for non U.S. markets, particularly those that were previously weighed down by tighter financial conditions.
Performance Momentum Outside The United States
Recent performance data strengthens the case for international equities. In both 2025 and early 2026, international markets outpaced U.S. stocks. While American indices remain historically strong over the long term, the leadership gap has narrowed. Investors who were heavily overweight U.S. mega cap growth stocks are now reconsidering diversification opportunities abroad.
This performance shift is partly due to market concentration risk within U.S. benchmarks. A small group of technology giants accounted for a significant portion of overall returns in recent years. As growth expectations normalize and competition increases, the dominance of these companies may no longer provide the same level of outperformance. In contrast, many international markets are more diversified across sectors such as industrials, financials, consumer goods, and energy.
Broader sector participation creates healthier market dynamics. When gains are distributed across multiple industries rather than driven by a handful of stocks, the rally tends to be more sustainable. JPMorgan believes this expanding breadth in global markets supports the view that international equities can continue outperforming, especially if U.S. leadership remains narrow.
Attractive Valuations Create Opportunity
Valuation differences between U.S. and international markets remain a compelling factor. On average, international stocks trade at lower price to earnings multiples compared with U.S. equities. These lower valuations reflect both historical underperformance and structural investor preferences for American markets.
From a strategic standpoint, lower valuations can offer a margin of safety. If earnings grow steadily, investors in lower priced markets may benefit from both profit expansion and potential multiple re rating. Even modest improvements in investor sentiment can drive strong returns when starting valuations are reasonable.
Value oriented investors may find particular appeal in international markets where financial institutions, industrial exporters, and consumer brands trade at discounts relative to U.S. peers. As economic conditions stabilize and global trade flows remain active, these sectors could experience renewed interest.
JPMorgan also notes that investor positioning remains skewed toward U.S. assets. If capital continues rotating toward underweighted regions, international equities could receive sustained inflows, amplifying performance momentum.
Currency Trends And The Role Of The Dollar
Currency movements play an important role in international investing. When the U.S. dollar weakens against other major currencies, returns on foreign investments become more valuable for dollar based investors. A softer dollar can also stimulate global trade and commodity demand, supporting export driven economies.
JPMorgan’s outlook anticipates potential dollar moderation, which could enhance the appeal of international equities. A declining dollar tends to improve earnings translations for multinational companies operating outside the United States. It also strengthens the balance sheets of emerging markets that borrow in dollars, reducing financial stress.
In addition, commodity linked economies often benefit from a weaker dollar environment. As global demand remains steady, resource exporting nations may see improved fiscal positions and corporate profitability. These factors create a reinforcing cycle where currency stability and economic growth support equity performance.
Earnings Resilience And Sector Rotation
Corporate earnings remain the most critical driver of long term stock performance. JPMorgan highlights that earnings growth in several international markets has surprised to the upside. Financial companies have benefited from stable interest margins, industrial firms from recovering global demand, and consumer businesses from resilient spending patterns.
The potential for sector rotation further strengthens the international thesis. After years of growth stock dominance, investors may increasingly favor cyclical and value oriented sectors that tend to perform well during steady economic expansions. International indices typically have greater exposure to these sectors than U.S. benchmarks.
For example, European markets often have higher weightings in financials and industrials, while certain Asian markets emphasize manufacturing and technology hardware. As global supply chains adapt and demand remains consistent, these industries could outperform segments that were previously overextended.
Broader earnings participation across regions suggests that international markets are not merely riding short term momentum but are supported by fundamental improvements in profitability.
Emerging Markets Add Long Term Growth Potential
Beyond developed markets, emerging economies offer structural growth opportunities driven by demographics, urbanization, and expanding middle classes. While these markets carry higher volatility and political risk, they also provide exposure to faster economic growth rates over the long term.
JPMorgan emphasizes that emerging market valuations remain attractive relative to developed peers. Many countries have strengthened fiscal discipline and improved monetary policy credibility compared with previous decades. As global investors search for diversification and growth, selective exposure to emerging markets may enhance portfolio returns.
However, prudent risk management remains essential. Emerging markets can be sensitive to global capital flows, commodity price swings, and geopolitical developments. Investors should approach these regions with balanced allocations and long term perspectives.
Risks That Could Challenge The Thesis
Despite the constructive outlook, risks remain. Geopolitical tensions, trade disputes, and unexpected commodity price spikes could disrupt global stability. If inflation were to re-accelerate sharply, central banks might be forced to tighten policy more aggressively than anticipated, pressuring equity valuations.
Another risk is the possibility of renewed U.S. market dominance. If American technology companies reassert strong earnings growth and innovation leadership, capital could rotate back into U.S. equities. Market cycles are dynamic, and leadership can shift quickly.
Additionally, political changes in major economies could influence regulatory policies, taxation, and fiscal spending. Investors should monitor developments closely and maintain diversified exposure across regions and sectors.
Strategic Considerations For Investors
For portfolio builders, JPMorgan’s perspective highlights the importance of geographic diversification. Relying heavily on a single market, even one as large as the United States, increases exposure to concentrated risks. Allocating capital across developed and emerging regions can improve risk adjusted returns over time.
Investors may consider broad international index funds, region specific allocations, or actively managed strategies targeting undervalued sectors. Currency exposure should also be evaluated carefully, as exchange rate movements can meaningfully impact performance.
Risk management remains central. Position sizing, rebalancing, and disciplined asset allocation help investors navigate volatility without reacting emotionally to short term swings. While the international equity narrative appears promising, maintaining long term perspective and diversification is essential.
Conclusion
JPMorgan’s assessment that the international stock story still has legs reflects a combination of supportive macroeconomic trends, attractive valuations, earnings resilience, and favorable currency dynamics. After years of U.S. outperformance, global markets are demonstrating broader participation and renewed investor interest.
The balanced growth environment, easing inflation pressures, and potential for dollar moderation provide a foundation for continued international equity strength. While risks such as geopolitical tensions and policy shifts remain, the structural case for diversification beyond the United States appears compelling.
For investors seeking opportunities in 2026 and beyond, international equities offer not only valuation appeal but also exposure to a wider set of economic drivers. As market leadership rotates and global growth stabilizes, the momentum behind international stocks may continue, reinforcing the view that this rally is more than a short lived rebound.