International equities delivered an impressive 2025, supported by strength in both emerging and developed markets, but their performance this year might be even more impressive. Broad international equity benchmark ACWX has gained 6.8%, marking its fifth‑best start to a year since 1988. Meanwhile, the iShares MSCI Emerging Markets ETF (EEM) has gain more than 11% YTD, which is its strongest January return since 2006. With the asset class already burning bright, should we be more optimistic about its outlook for the remainder of the year, or has the group become too hot to handle?

There have been six other years in which ACWX gained 5% or more through January, and only two of those instances saw the fund move lower from February to December. That said, stronger starts to the year have typically been followed by lower average returns across the remainder of the year, especially within emerging markets. When ACWX gains 5% in January, it averages 1.9% across the rest of the year compared to 6.5% when ACWX gains less than 5% in January. Emerging markets show an even larger discrepancy, with EEM losing 2.3% over the rest of the year compared to a 12% return when ACWX rises less than 5% in January. While developed markets were less impacted, the iShares MSCI EAFE ETF (EFA) still underperformed the rest of the year after a hot start. As a result, the strong January performance could mean that the asset class is due for some cooling off.

One counterargument is that the strength of international equities has not been limited to the past month. International equities have been a point of leadership over the last year, causing significant developments in relative strength. ACWX recently moved to a market RS buy signal against the S&P 500 Equal Weight (SPXEWI) for the first time in nearly 20 years. While 2006 to 2008 was previously the only period in which international equities were favored, following this relationship has still outperformed both individual markets, suggesting continued strength for ACWX.

Furthermore, international equities are now within striking distance of first place in DALI. The asset class gained ten signals in January while domestic equities lost three, placing them within three signals of each other. Apart from a brief three‑day stretch last April, international equities have remained outside of DALI’s top spot since 2023. With historical trends and DALI providing conflicting views on international equities, how should we view the group?

Thankfully, the Asset Class Group Scores page offers some additional context. Among the top 20 groups by score, 13 are international, with Latin America leading the way as the iShares S&P Latin America 40 ETF (ILF) is up more than 20%. Broadly speaking, most international groups display extremely high levels of strength. However, most of them are also extremely overbought, showing OBOS readings well above 100%. In fact, EEM’s current OBOS reading of 146% is its highest since 2004. While the long-term outlook of those groups remains solid, they could be poised for near-term pullbacks as they consolidate back to normal levels.

For the time being, both domestic and international equities remain the two strongest asset classes in the market, deserving allocation within most portfolios. International equities could soon overtake the US, but investors should wait for some degree of normalization before adding to most international positions given the group’s extended and overbought state.

On Sunday, Sam Darnold and the Seattle Seahawks defeated the Los Angeles Rams in a nailbiter to advance to Super Bowl LX, where they will face Drake Maye and the New England Patriots, setting up a clash between two quarterbacks playing in their first Super Bowl. While the Patriots are no strangers to the Super Bowl, having appeared in and won more championship games than any other team in the NFL, this is their first appearance without Tom Brady. It also marks just the first time in the last four seasons that Patrick Mahomes will not represent the AFC in the Super Bowl.

The term “any given Sunday” is often used to describe the parity in the NFL, however, over the last quarter century, a few AFC quarterbacks have reached the Super Bowl with surprising regularity. The situation this year – two quarterbacks both playing in their first Super Bowl has been more the exception than the rule in recent history. Combined, Tom Brady, Peyton Manning, Ben Roethliberger, and Patrick Mahomes have quarterbacked the Super Bowl for AFC in 21 of the last 24 years (not including the upcoming game.) When we consider that, if selected at random, any team in the NFL has a 6.25% (1/16) chance of making it to the Super Bowl in any given year, the regularity with which these signal callers have appeared in the biggest game of the year is astounding.

There has been more parity in the NFC, but there have been teams and quarterbacks that have stood out from the pack. For example, the Philadelphia Eagles have appeared in three Super Bowls since 2018 and Russell Wilson and the Seattle Seahawks reached the Super Bowl in consecutive seasons in 2014 & 2015.

We often discuss sports and sports rankings as a great way to understand relative strength and to explain it to clients. The trend of a select few teams (and quarterbacks) dominating the AFC Super Bowl appearances is a great case in point. If at the beginning of the NFL season you were asked which team(s) you thought would make it to the playoffs and ultimately the Super Bowl, the first piece of information you would factor into your choice would be the outcome of the previous season – all else being equal, we generally expect players and teams that performed well last year to do well this year. And looking at the distribution of AFC Super Bowl appearances, betting on teams that had historically performed well has been a sound strategy over the last 24 years, this year notwithstanding.

This is the same concept that underlies relative strength rankings. Every day that the market is open is essentially a giant competition amongst thousands of stocks and funds. However, unlike sports teams which compete against each one at a time, each security in the market is simultaneously competing against every other security market. This provides us with approximately 250 head-to-head competitions each year which can be used to evaluate and rank these assets.

Each day, we record the score for each security, i.e. price, and then compare the relative performance of each by plotting the results on a relative strength chart. Over the course of many games, a picture begins to develop of which teams, i.e. securities, are consistently outperforming the field, i.e., exhibiting positive relative strength. Just as with sports teams, we expect securities with positive relative strength to continue to outperform, until we begin to see evidence of that a change in trend is underway.

Two of the stocks with the longest-lived relative strength buy signals in the S&P 500  are Apple (AAPL) and Visa (V), which have been on market RS buy signals since 2004 and 2012, respectively. Over the last 15 years, both stocks have handily outperformed the S&P 500 and last year was the only year since 2011 when both stocks underperformed the index. In the NFL, there is no guarantee that a team that advanced to the Super Bowl last year will repeat that performance next year, however, over the last 24 years we have seen a handful of teams and players, especially AFC teams, accomplish that feat with great frequency. Similarly, there is no guarantee that relative strength-based investment strategies will continuously provide superior results. However, like selecting football teams with strong track records, we believe that selecting investments with positive relative strength will allow us to outperform the field over the long term. 

APPLE & VISA Performance Quilt 2011 - 2025

Daily Option Ideas for January 29, 2026