International equities regain momentum as investors reassess global balance, says Grogan

A shift in global equity leadership has been one of the defining market themes in 2026, with international equities outperforming their US counterparts.

In an interview with InvestmentNews, Kevin Grogan, chief investment officer of Systematic Strategies at Focus Partners, says the move probably reflects a mix of both short-term and longer-term forces, , pointing to “a weaker dollar, a sentiment reversal after years of undervaluation, and fiscal stimulus in Europe” as key cyclical drivers behind the recent outperformance.

At the same time, he highlights deeper structural considerations, noting that “US equities entered this period at valuations rarely seen outside the dot-com era, and concentration in a handful of large-cap technology companies has reached a level that gives investors pause.”

“Historically, leadership has rotated between US and international equities over long cycles, with neither region holding a permanent edge, Grogan notes.

The sustainability of this trend remains an open question. While international equities continue to trade at a discount, Grogan cautions against overconfidence in any single narrative.

“The valuation gap is real as non-US equities still trade at a meaningful discount to US stocks even after last year’s strong performance,” he says. However, “currency movements are incredibly difficult to predict,” and several factors could quickly reverse the trend, including “a resurgence in US earnings growth, a flight to safety toward US assets, or a dollar rebound.”

Discipline and consistency

For that reason, Grogan emphasizes a disciplined, long-term approach. “This is exactly why we treat an allocation to international equities as a structural portfolio decision rather than a tactical trade.”

That perspective is especially relevant for advisors managing portfolios heavily tilted toward US equities. Rather than reacting to recent performance, Grogan urges consistency.

“Stick with your long-term investment policy and let that guide the rebalancing decision, not recent performance,” he says. “The right international allocation will vary by portfolio design and client profile, but the principle remains the same: set a target you can defend in both good and bad years for international markets and hold to it.”

Currency exposure is another area drawing increased attention, particularly given its role in boosting unhedged international returns. Grogan draws a clear distinction between asset classes.

“For equities, volatility is driven far more by stock price swings than currency movements, so hedged and unhedged global equity portfolios have shown similar volatility over time,” he explains. “For bonds, currency moves can have an outsized impact on a lower volatility asset class, making hedging far more meaningful.”

Beyond portfolio construction, Grogan also highlights the importance of reframing how clients think about global diversification after more than a decade of US dominance.

“Roughly 35% of the world’s publicly traded equity value sits outside the United States, so investing only in US stocks isn’t a neutral or conservative choice,” he says. “It’s a significant bet that one country will outperform the rest of the world indefinitely, and most clients, when you put it that way, recognize that’s not what they intended.”

He also points to history as a useful reminder. “The US dominated global markets for most of the past 15 years, but international equities led for much of the 1970s, 1980s, and again in the 2000s,” Grogan says, adding that “global diversification is a long-term risk management strategy, not a short-term performance call.”

What’s to come?

When it comes to assessing whether international outperformance can continue, Grogan returns to fundamentals—while cautioning against overreliance on any single signal.

“The most reliable signal is valuation,” he says, noting that “international markets, even after their strong 2025 performance, still trade at a significant discount to US equities, suggesting that international equities have higher long-term expected returns.”

Still, he warns against using valuations as a timing tool. “Stock returns are much too noisy to use any single variable (including valuations) for purposes of timing the market in the short-term,” he says, adding that “other factors like relative earnings growth and the direction of the dollar are also important indicators, but they too can be very difficult to predict.”

Even as international markets gain traction, Grogan is clear that the answer is not to abandon US equities—particularly given the continued strength of large-cap technology.

“The goal isn’t to abandon US equities; it’s to avoid being entirely dependent on them,” he says. “Large-cap US technology companies have been exceptional businesses, and the earnings have largely justified the enthusiasm.”

Instead, he advocates balance. “Our approach is to maintain meaningful US equity exposure while complementing it with internationally diversified holdings,” Grogan says. “Building a portfolio that doesn’t require any single theme, sector, or country to keep performing at an exceptional level indefinitely is a winning strategy over the long run.”