Global markets have been mixed so far in 2026, and the reasons vary significantly by region. In some countries, performance has been driven by resilient earnings, as well as rate expectations. In others, investors have focused on forward growth momentum (e.g., improving activity data and earnings revisions), alongside policy and geopolitics. That divergence is exactly why international results may seem confusing at first glance: The same macro headline such as “higher oil prices” or “sticky inflation” may support certain sectors in one market while weighing on another, depending on each market’s sector mix and exposures.

Investors can typically gain exposure to international markets through either individual stocks or index funds. The latter refer to mutual funds or exchange-traded funds (ETFs) that track global benchmarks such as MSCI indexes. One nuance worth noting, however, is that many widely quoted index returns are shown in local currency, not U.S. dollars. For U.S.-based investors, currency movements can have a meaningful impact as exchange rates against the dollar may amplify or reduce potential returns.

So how have major international equity benchmarks – including those in Europe, China and India – performed so far in 2026? Here are some key drivers behind those moves and what they could mean for investors.

At a glance: 2026 year-to-date performance by major region

When considering the global picture, it can be helpful to start with a familiar reference point. In the United States, the benchmark S&P 500 has returned 9.4% through July 31, 2026.¹ U.S. markets have continued to rally, hitting several new record highs this year despite lingering inflation pressures and oil price shocks attributable to the ongoing conflict in Iran. Momentum has been carried by strong corporate earnings and a surge in business spending on artificial intelligence (AI).

Here’s how that compares to other major stock market indexes around the world. Returns shown are year-to-date (YTD) price returns for each index in its local currency as of July 31, 2026.

Europe in 2026 so far: What’s driving returns?

European equities have been supported by a rotation beyond tech stocks, with banks, industrials and other cyclicals playing a larger role in driving market performance. The STOXX Europe 600 and the Euro STOXX 50 – two key benchmarks that track shares across European markets – are up 9.5% and 9.7%, respectively.² European gains also reflected surprisingly robust corporate earnings, which in turn pushed the STOXX Europe 600 to new record highs in recent months. At the same time, European stocks remain sensitive to geopolitical shocks, energy prices and rate expectations, with the ongoing conflict in the Middle East a source of recent investor worry.³

In the United Kingdom, the FTSE 100 has gained 9.4% through the end of July.⁴ Despite inflationary pressures, the index has delivered a solid performance, led by defense and banking stocks. Strong corporate earnings and a lack of heavy exposure to tech and semiconductor stocks also helped.⁵

China in 2026 so far: Sentiment, policy and structural themes

China’s onshore market has struggled to sustain momentum as investor confidence is repeatedly tested by volatility. The CSI 300, which tracks the performance of the top 300 companies listed on the Shanghai and Shenzhen stock exchanges, was down 0.9% through the end of July.⁶ In Chinese markets, periodic optimism around policy support and stabilization efforts has been offset by investor caution. A recent sell-off of tech and AI supply-chain stocks, coupled with ongoing concerns over the real estate sector and sluggish domestic economic demand, has weighed on policy support, which has been visible but not constant.⁷

Offshore, Hong Kong’s Hang Seng Index has reflected many of the same crosscurrents and was up about 1% through the end of July.⁸ Relative to the CSI 300, the Hang Seng reflects a different mix of sectors and investors, which can make it more sensitive to global risk appetite and foreign investor sentiment. Despite pockets of strength, however, Hong Kong markets have similarly been held back by skepticism around growth momentum and uneven investor confidence.⁹

India in 2026 so far: Growth story vs. valuation and concentration

The Nifty 50, which tracks the largest Indian companies, was down 6.7% through the end of July.¹⁰ The decline has been driven by a combination of foreign outflows, sector headwinds and macro sensitivity rather than a single headline. Investors pulled more than $29 billion from Indian equities in the first half of 2026, while India’s technology sector has been a notable source of pressure amid AI disruption fears and weaker corporate earnings.¹¹ Higher oil prices linked to the conflict in the Middle East have also impacted markets and contributed to inflationary pressures, as India is a major importer of crude oil.¹²

Japan in 2026 so far: Reforms, rates and currency effects

Japan’s Nikkei 225 was a standout among major international benchmarks, gaining 27.9% through the July 31 close.¹³ Performance has been powered by AI- and semiconductor-related stocks, while governance and shareholder-focused reforms have helped support the backdrop for Japanese equities more broadly. The flip side is that concentrated market leadership means the index can also be more prone to AI- or chip-related stock sell-offs.¹⁴ What’s more, Japan’s market has been reacting to currency headlines, especially after a joint intervention involving Japan and the U.S. strengthened the yen after it touched a 40-year low against the dollar.¹⁵

What this means for investors: Diversification, currency and implementation

International equities are not a single, uniform exposure; they’re a set of markets with distinct sector compositions, valuation profiles, policy backdrops, and currency dynamics – so returns can diverge sharply even within the same year.

International exposure can help diversify a U.S.-based portfolio because leadership doesn’t always come from the same sector, industry or region. Some markets may tilt more toward banks, industrials and energy, while others might lean into technology, semiconductors or export-heavy manufacturers. When market leadership narrows, diversifying across regions may help reduce reliance on any single driver.

If you invest in international stocks from the U.S., your return in dollars usually comes from two sources: how the market did locally (in its own currency) and what happened to the currency versus the U.S. dollar. When currencies are relatively steady, the difference may be small. But when currencies swing, they can meaningfully boost – or drag – your results in dollar terms.¹⁶

Some investors consider currency-hedged approaches to reduce currency-driven volatility, while others remain unhedged to maintain currency diversification. Either way, the key is aligning the approach to your goals, time horizon and risk tolerance.

International exposure is often implemented through the following:

• Broad international mutual funds/ETFs (for diversified exposure)
• Regional or single-country funds (for targeted tilts with higher concentration)
• Active strategies (which may enable security selection or help with risk management)¹⁷

For investors, the goal isn’t to predict which region “wins” next, but rather to understand what you already own, avoid chasing performance and allocate your exposures in a way that aligns with your time horizon and long-term goals. A simple strategy that can help is rebalancing – that is, periodically resetting allocations so strong performers don’t become a larger risk than you intended.

International markets can carry risks that show up quickly in returns, including geopolitical shocks, sudden policy shifts, constraints related to liquidity and market access, and meaningful differences in index composition. Even similarly named indexes can track different opportunity sets (and behave differently under stress).

The bottom line

International index performance in 2026 has been uneven because the drivers of returns have differed by region – from earnings and sector rotation in Europe, to AI-linked concentration in Japan, to investor confidence in China. For U.S.-based investors, it’s worth remembering that local market returns aren’t the full story: Currency moves can meaningfully amplify or reduce dollar-based results.

Three drivers explain much of the gap in results so far:

• Shifting expectations concerning policy and rate paths across major central banks
• Earnings strength and index concentration (where a handful of sectors or mega-cap names can do most of the lifting)
• Currency moves that can materially change outcomes for U.S.-based investors when translating local returns into U.S. dollars¹⁸

The biggest risks to watch in the second half of 2026 potentially include renewed geopolitical shocks that move energy prices and inflation, sudden repricing of rate expectations, and concentrated market leadership tied to AI- and semiconductor-related themes, which may increase volatility risk if sentiment turns.¹⁹

Rather than trying to predict which region wins next, investors may be better off focusing on diversification and understanding their international benchmark exposure in terms of sectors, concentration and currency.

Frequently asked questions about international stock indexes