Key TakeawaysEmerging market (EM) assets have seen a historic start to 2026, with the MSCI EM Index surging 8.9% in January alone, significantly outperforming the S&P 500 (SPY)'s 1.5% gain.The U.S. Dollar Index (DXY) fell to a four-year low near 97.0, extending a 9.4% decline from 2025 and providing a massive tailwind for developing nation currencies.Record-breaking capital inflows hit the sector in early 2026, with MSCI emerging market ETFs attracting over $20.6 billion in January, the largest monthly inta ...

Core Insights - International stocks and related ETFs are expected to outperform the S&P 500 in 2025, with the WisdomTree International Equity Fund (DWM) showing a performance margin of over 2-to-1 against the S&P 500 as of November 20 [1][2] - Professional investors are optimistic about international equities for 2026, with 42% of respondents in Bank of America's Global Fund Manager Survey believing they will be the top-performing asset class [3][4] Performance Analysis - DWM has outperformed the MSCI EAFE Index by 300 basis points and has exhibited lower annualized volatility compared to developed markets [1] - The fund, which has a market size of $602.3 million, is approaching its 20th anniversary and is not considered overbought despite its strong performance in 2025 [4] Market Sentiment - The global rebalancing theme is gaining traction, with U.S. policies contributing to lower oil prices and fiscal stimulus in other regions [4] - Only 10% of professional investors surveyed believe Japan's Nikkei will be the best-performing equity index next year, which is relevant for DWM as it allocates nearly 25% of its weight to Japanese stocks [6] Overbought Markets - Countries identified as having the most overbought equity markets include South Korea, South Africa, Brazil, Spain, and Taiwan, with only Spain represented in DWM at 5.91% [5]

Core Viewpoint - The U.S. dollar has stabilized after a significant decline earlier this year, but many market participants still anticipate further losses due to ongoing bearish trends and economic concerns [1][3]. Group 1: Dollar Performance and Market Sentiment - The dollar index experienced an approximate 11% decline over six months ending in June, marking one of its steepest drops on record [1]. - Recent weeks have seen a stabilization of the dollar alongside a reduction in bearish futures positions, with speculators' net short dollar position decreasing to $5.7 billion from about $21 billion in late June [2]. - Investors perceive the current stabilization as a temporary pause rather than a reversal, driven by concerns over U.S. fiscal and trade deficits and potential aggressive rate cuts by the Federal Reserve [3][4]. Group 2: Economic Concerns and Federal Reserve Actions - Soft job data may provide the Federal Reserve with the opportunity to implement more aggressive rate cuts, which could diminish the yield advantage of the dollar [5]. - The Federal Reserve is expected to resume cutting short-term rates in the near future and continue this trend throughout the year, with analysts maintaining a bearish outlook on the dollar [6]. Group 3: Global Investor Positioning - Global investors have become heavily exposed to U.S. assets due to years of U.S. outperformance, leading to a reassessment of hedging strategies following tariff-related market turbulence [7]. - With foreign holdings of U.S. assets amounting to trillions, any significant reduction in exposure could negatively impact the dollar, although such a move has not yet been observed on a large scale [7].

Market Performance - US stock market shows "U S exceptionalism" with Nasdaq and S&P 500 outperforming global peers since early April [1]