Emerging markets notch a milestone nearly 15 Years in the making... but the move echoes a notable shift in a pre-2000's world.
The creation of Instagram. Apple releasing the iPad. A 31-year old Drew Brees leading the Saints to their first Super Bowl over the Indianapolis Colts. All of these things last happened in over a decade and a half ago in 2010, the last time that today’s featured relative strength chart sat in O’s. On Friday 2/20/2026, the S&P 500 reversed back down into a column of O’s on its 6.5% chart against emerging markets representative EEM. The move acts as further confirmation of international dominance, following suit with other broader indicators like DALI or the Asset Class Group Scores Page showing international leadership starting earlier in 2025. Peering back at the RS chart, the move can’t help but remind even the most confident bull of the reversal lower in early 1999, pre-dating a decade of domestic underperformance. Interestingly enough, the 26-box column from January of 1995 to April of 1999 is the exact same height/length as the 26-box column established from September 2011 to February of 2026… making it difficult to not draw comparisons between the two.
It goes without saying that no one RS chart is the “silver bullet” that will predict the next lost decade for domestic equities, especially when chart action is admittedly so limited. Since 1988, there have been just 21 reversals on this 6.5% RS chart, and only two notable (albeit elongated) instances in which SPX posted a buy signal against EEM. As chart action is so sparce, it can be difficult not to draw an immediate conclusion that this comparison signals the end of domestic equity leadership in a similar fashion to the reversal down in 1999. While certainly possible, what is perhaps the more likely outcome is continued heighted volatility as the two groups vow for control. You’ll notice the two stems of domestic equity outperformance marked consistent leadership, while other instances of international strength saw more back and forth as market direction was far less consistent. It’s worth noting that an advisor following the signal switching portfolio (owning whichever asset is on a buy signal) or the reversal switching portfolio (owning whichever asset maintains a column of X’s) is profitable over buy and hold portfolios of either asset on its own.
Remember, it is our job to keep our ear to the ground to keep track of notable shifts occurring. While today’s shift in relative strength certainly isn’t worth shifting broad allocation around for on its own, the number of signals pointing towards a change in strength between international and domestic equites is certainly growing. Keep this in mind when you receive new capital from clients… it might be worth having a short list of ideas to take advantage of leadership as we move into the final month of Q1 2026.
