International stock funds have delivered a strong start to 2026, posting a 9.3% year-to-date return through February. This performance outpaces U.S. funds, which have managed only a 2.7% return so far this year. The data from LSEG highlights a significant divergence in performance between domestic and international markets.

U.S. equity funds have struggled, with the average fund returning just 0.1% in February alone. This tepid performance has left American investors watching as international markets take the lead in the mutual fund race. The disparity underscores shifting global market dynamics and investor sentiment.

The contrast in returns raises questions about portfolio allocation strategies for 2026. While U.S. markets have historically dominated, the current data suggests international diversification may be more valuable than in recent years. Investors may need to reassess their exposure to global markets.