Strykr Analysis
BearishStrykr Pulse 38/100. US equities are losing steam as global rotation accelerates. Threat Level 4/5.
If you blinked, you missed the moment when US stocks were the only game in town. The start of 2026 has been a cold shower for anyone clinging to the narrative that American equities are invincible. Forget the old playbook, this year, the S&P 500 is off to its worst start since 1995, and the global rotation trade is not just a whisper in the prop desk chat, it's a full-throated yell. The real story? The S&P 500’s stumble is less about earnings and more about a tectonic shift in capital flows, with international markets eating the US’s lunch.
Let’s talk numbers. The S&P 500 has been treading water, but beneath the surface, the undercurrents are unmistakable. According to MarketWatch and Barron's, international stocks are outperforming, and the 'Sell America' trade is gaining converts. Fundstrat’s Tom Lee says most stocks haven’t even priced in strong earnings, but the tape doesn’t lie: flows are leaving US equities for greener pastures abroad. Meanwhile, the XLK Tech ETF is stuck at $140.905, flatlining as traders rotate out of US mega-cap tech and into anything that isn’t dollar-denominated. The DBC commodity ETF is equally comatose at $24.2, but that’s another story.
The macro backdrop is not doing US stocks any favors. The Fed’s latest minutes (Proactive Investors, 2026-02-18) show policymakers are in no rush to cut rates, and inflation remains stubborn. AI-driven growth is still the buzzword, but the market’s confidence looks more like hubris. BofA’s latest survey (Barron's, 2026-02-18) finds global investor sentiment at its most bullish since June 2021, and cash allocations are scraping the bottom of the barrel. When everyone’s leaning the same way, you know what happens next.
Historically, US equities have been the default safe haven, but that’s a rearview mirror take. In the 2010s, the US outperformed the world by a mile, but mean reversion is a cruel mistress. The last time the S&P 500 started the year this poorly was the year Toy Story hit theaters. That was also the year international stocks began a multi-year run. Correlations are breaking down: while the S&P 500 stalls, European and Asian indices are quietly grinding higher. The dollar’s recent strength has masked the exodus, but currency-adjusted returns tell the real story. The US exceptionalism trade is wobbling, and the cracks are widening.
The analysis here is simple: global investors are finally waking up to the fact that US valuations are rich, the Fed is boxed in, and the rest of the world is catching up. The AI narrative propping up US tech is looking tired, and the market’s overconfidence is a red flag. When equity funds are running record-low cash, and everyone’s bullish, the contrarian alarm bells start ringing. The 'Sell America' trade isn’t just a meme, it’s a rotation with teeth.
Strykr Watch
Technically, the S&P 500 is flirting with key support levels. The XLK ETF at $140.905 is stuck in a sideways range, with resistance at $143 and support at $138. Breadth is deteriorating, with fewer stocks making new highs. Watch for a break below $138 in XLK as a signal that the rotation is accelerating. Overseas, European indices are breaking out to multi-month highs, and Asian markets are showing relative strength. The dollar index is at a crossroads, if it rolls over, expect the outperformance of international equities to accelerate. RSI on XLK is neutral, but momentum is fading. Volume is drying up, suggesting conviction is lacking on the US side.
The risk here is that the US market’s complacency gets punished. If the Fed surprises with hawkish rhetoric, or if inflation refuses to budge, the S&P 500 could see a sharp correction. A break below key support in XLK could trigger a wave of algorithmic selling, dragging the broader market lower. Geopolitical risks are lurking, and any shock could accelerate the rotation out of US assets. The real bear case is that US equities are no longer the global safe haven, and capital flows become a one-way street out of America.
On the flip side, the opportunity is in the global rotation. Traders willing to look beyond US borders can find relative strength in European and Asian equities. The play is to short US mega-cap tech on rallies and go long international indices on dips. For the bold, a pairs trade, short XLK, long Euro Stoxx 50, could capture the spread. Watch for a dip in XLK to $138 as a potential short entry, with a stop at $143 and a target at $132. On the long side, international ETFs are the place to be, especially as the dollar weakens.
Strykr Take
The US equity market’s worst start since 1995 isn’t just a bad stat, it’s a warning shot. The global rotation is real, and the days of US exceptionalism are numbered. The smart money is already moving abroad, and the tape is confirming it. Ignore the rotation at your own peril, this is not a drill. The S&P 500 is no longer the only game in town. Adapt, or get left behind.
Sources (5)
Fundstrat's Tom Lee: Most stocks haven't reflected strong earnings season
Tom Lee, Fundstrat and Bitmine, joins 'Closing Bell' to talk the state of the markets and large themes moving stocks in the final hour of trading.
Why U.S. stocks are off to the worst start since 1995*
U.S. stocks are having their worst start since 1995, the same year Pixar's original Toy Story was released. Yahoo Finance Host Julie Hyman, Yahoo Fina
Should You Buy a Fund of Private Companies? What Investors Need to Know
Wall Street is removing the velvet rope from a once-exclusive club. But is the party inside worth attending?
The bullish breakout in these stocks suggests the housing market has turned a corner
With U.S. housing starts perking up, investors may be looking at an early entry point for a broad recovery for home builders and their stocks.
U.S. stocks are falling behind. It could be the beginning of an epic shift toward global markets.
International markets have been outperforming their American rivals recently. Investors could still be in the early innings of a years-long trend.