For years, Wall Street was the only game in town, powered by a handful of tech titans known as the “Magnificent 7.” But as of February 13, 2026, the narrative has shifted. With US mega-caps stumbling and international markets surging, we are witnessing a historic “Great Rotation” as capital hunts for value beyond American borders.
The Magnificent 7 Falter
The primary engine of the US market is sputtering. After peaking in October 2025, the Mag 7—including giants like Nvidia, Apple, and Microsoft—have officially entered a technical correction, falling more than 10% from their highs. Investors are grappling with “AI fatigue,” questioning the immediate returns on massive infrastructure spending while face-to-face with stretched valuations. This concentration risk has left the S&P 500 vulnerable, prompting a massive rebalancing toward under-owned assets.
International Markets Catch Fire
While Wall Street cools, the rest of the world is heating up. In January 2026, international equity ETFs attracted a record $51.6 billion in inflows. This marks the 17th consecutive month of capital flight into global funds. Despite representing only 15% of total ETF assets, these funds captured a staggering 33% of all global inflows last month.
Emerging Markets (EM) are the primary beneficiaries. US-listed EM ETFs have seen 15 straight weeks of inflows, totaling $42.8 billion. The MSCI Emerging Markets Index gained 8.8% in January, its strongest start since 2012, vastly outperforming the S&P 500.
The “Midterm Miracle”: A Reason to Hedge?
Despite the rush for the exits, history suggests a complete abandonment of the US might be premature. 2026 is a Midterm Election year. Since 1942, the S&P 500 has never posted a negative return in the seven months following Midterm Election Day. The median return for this period is a robust +15.2%, surviving everything from the Cold War to the 2008 financial crisis.
The Bottom Line
The data suggests a dual-track strategy. While international and emerging markets offer the best growth and valuation potential in the immediate term, the “undefeated” US midterm cycle provides a compelling reason to maintain a core US position. For the 2026 investor, the winning move isn’t picking one side of the ocean—it’s finally building the global portfolio that Wall Street’s long bull run made many forget.
