Wall Street’s Global Value Hunt: Why US Equities’ Dominance Faces Its Biggest Test in Years

If you thought the US equity market’s global supremacy was unassailable, you haven’t been paying attention to the latest rotation. For years, American stocks, especially the tech darlings, have been the only game in town. But as the dollar stumbles and value stocks outperform growth by a margin not seen since the pandemic, Wall Street’s biggest allocators are quietly shopping for bargains everywhere but home.

The past week has seen a sharp divergence: value stocks are trouncing growth, large-cap tech is suddenly a source of funds, and the US dollar’s rout is making foreign assets look less like a career risk and more like a career opportunity. The Wall Street Journal reports a surge in global value flows, with portfolio managers openly questioning whether America’s lead is about to shrink for the first time in a decade.

The numbers tell the story. The S&P 500’s outperformance over global peers has narrowed to its tightest spread since 2017. According to Seeking Alpha, value stocks have beaten growth by over 4% YTD, while the tech-heavy Nasdaq is stuck in neutral. The dollar index is down 3% in two weeks, and the yen and euro are suddenly in vogue. Even emerging markets are seeing inflows, as the ‘America First’ trade starts to look crowded.

What’s driving the shift? Start with the dollar. The greenback’s abrupt slide has less to do with US economic weakness and more to do with a global search for yield and diversification. China’s rumored Treasury dump, the Fed’s wavering on rate cuts, and a relentless bid for hard assets have all conspired to knock the dollar off its perch. Add in sky-high US equity valuations and you get a recipe for rotation.

The context is impossible to ignore. For a decade, US stocks have outperformed everything, fueled by tech innovation, buybacks, and a TINA (There Is No Alternative) mindset. But with rates peaking, AI hype running into reality, and global macro risks on the rise, the TINA trade is looking tired. European and Asian equities, long considered value traps, are now getting a second look as the dollar weakens and US multiples look stretched.

The real story is not just about flows, but about psychology. Portfolio managers who spent years explaining why they were underweight Europe or emerging markets are now scrambling to justify why they’re not overweight. The dollar’s slide is both a symptom and a catalyst: as it falls, foreign earnings look better, and US assets look relatively expensive. The last time we saw this kind of rotation was in the aftermath of the 2016 election and, before that, the early 2000s tech unwind. Both times, the shift lasted longer than anyone expected.

Strykr Watch

Technically, the US equity indices are still holding up, but the cracks are visible. The S&P 500 is flirting with key resistance at 5,000, while the Nasdaq is stuck in a range. Value indices are breaking out, with the MSCI World Value Index up 6% YTD. The dollar index (DXY) is testing multi-month lows at 98, with support at 97. If the DXY breaks 97, expect the rotation to accelerate.

Foreign markets are perking up. The Euro Stoxx 50 is trading above its 200-day moving average for the first time since September, and the Nikkei is flirting with all-time highs. Emerging markets, led by India and Brazil, are seeing the strongest inflows since 2021. Watch for a move above 5,050 in the S&P 500 to invalidate the rotation thesis, but right now, the momentum is with value and global.

The risks are clear. If the US economy surprises to the upside and the Fed delays rate cuts, the dollar could snap back, crushing the rotation. If global growth falters or geopolitical risks flare (think Taiwan or Middle East), the safe-haven bid for US assets will return with a vengeance. And if tech earnings surprise to the upside, the growth trade could come roaring back.

But there are opportunities. For the first time in years, it makes sense to look outside the US for equity alpha. European and Japanese value names, especially in industrials and financials, are breaking out. Currency-hedged strategies can juice returns if the dollar keeps falling. And for the bold, emerging markets offer leverage to both growth and dollar weakness. The key is to avoid chasing laggards, focus on quality value with real earnings power.

Strykr Take

This is a regime shift, not a blip. The US market’s dominance is being challenged by a perfect storm of valuation, currency, and psychology. If you’re still all-in on American tech, you’re playing last year’s game. The smart money is already rotating. Don’t get left holding the bag.

(datePublished: 2026-02-10 07:30 UTC)