why are international stocks down — causes & signals

Why Are International Stocks Down?

As of 16 January 2026, market commentary asked a simple question often heard in portfolio meetings: why are international stocks down? This piece answers that question clearly for beginners and experienced investors alike. You will learn how to tell whether declines are local‑currency or US‑dollar driven, which macro and market indicators to watch, and which practical steps investors typically take — including how Bitget and Bitget Wallet fit into a modern global‑market toolkit.

Note: this article focuses on market drivers and indicators, not investment advice. All references to recent market events are dated and sourced where relevant.

Definition and scope

In asking why are international stocks down, it helps to define what we mean by “international stocks.” For this article, international stocks refers to exchange‑listed equities outside the United States. That includes:

• Developed ex‑US markets (for example, Europe, Japan and other OECD markets).
• Emerging‑market equities (China, India, Brazil, South Africa, Indonesia, etc.).

Common benchmarks and instruments used to measure international performance include the MSCI All Country World Index ex‑US (MSCI ACWI ex‑US), regional indices (MSCI Europe, MSCI Emerging Markets), country‑level indices (TOPIX, FTSE 100, SSE Composite), and broad international ETFs that track those indexes. Comparing those series to US benchmarks (S&P 500, Nasdaq 100) lets analysts separate absolute declines from relative underperformance.

When readers ask why are international stocks down they usually mean one of two things:

1. Absolute declines in local‑currency or US‑dollar terms (prices have fallen).
2. Relative underperformance versus US equities (international stocks rose but lagged US gains).

This article treats both meanings and shows how currency and valuation effects can make the same price movement look very different depending on the currency used to measure returns.

Historical context and recent performance patterns

Over the last decade, US equities—especially a small group of mega‑cap technology firms—delivered prolonged outperformance versus many international markets. That concentration produced a long tail of relative underperformance in ex‑US indices. Yet markets cycle: episodes of international outperformance have followed shifts in currency trends, commodity cycles, monetary policy divergence, or sector leadership rotations.

Relative performance reversals often begin with three linked changes: a significant move in the US dollar, a change in interest‑rate expectations (or central bank messaging), and a shift in sector leadership (for example, from US tech to overseas industrials or energy). The question why are international stocks down is therefore rarely about a single cause; it is usually about several interacting forces.

Main drivers that can make international stocks fall

Below are the principal channels that explain why are international stocks down. Each channel affects markets differently and can be either short‑lived or persistent depending on underlying conditions.

Currency movements (USD strength)

A stronger US dollar reduces dollar‑denominated returns on foreign assets. If a European stock gains 2% in euros but the euro weakens 3% versus the dollar, a US investor measuring performance in dollars records a loss. USD strength also often coincides with capital flowing into dollar assets (US Treasuries, US equities), amplifying pressure on international stocks priced in local currency when measured in dollars.

When people ask why are international stocks down, currency is almost always near the top of the explanation. Watch the US Dollar Index (DXY) as a quick cross‑market thermometer.

Monetary policy and interest‑rate differentials

Differing central bank paths change bond yields and equity discount rates. If US rates are expected to stay higher for longer, while foreign central banks signal easing or weaker growth, yield differentials can push investors toward US fixed income and US equities. Higher local yields abroad may help banks but can also slow growth and compress equity valuations.

Monetary policy divergence also alters the cost of capital for companies and changes currency expectations — two channels that feed into why are international stocks down.

Slower local economic growth and weaker corporate earnings

Poor GDP prints, falling industrial production, or profit‑warning waves in a region lead to direct valuation pressure. A regional earnings downgrade cycle (lower earnings per share revisions) is one of the most fundamental reasons international stock indices fall: expected future cash flows decline and so do prices.

Trade policy, tariffs and global supply‑chain disruption

Uncertainty over trade policy and tariffs damages export‑oriented economies. Exporters face demand shocks, higher costs, and planning uncertainty, which reduce investor appetite for international equities. For example, court rulings or policy reversals that change tariff income or import regimes can quickly affect trade‑exposed sectors.

As of 16 January 2026, market reports flagged a pending court decision on tariffs and the potential for large fiscal consequences. Polymarket pricing showed roughly 73% odds the court would strike down a long‑running tariff program; commentators warned this outcome could create sizeable refund liabilities and rapid market repricing. Such a shock can cause liquidity to be pulled from risk assets globally — a direct channel for why are international stocks down in USD‑terms.

Geopolitical risk and political/regulatory shocks

Sanctions, major regulatory crackdowns, or sudden political instability increase risk premia. Regulation aimed at particular sectors (for example, technology or finance) can materially alter profit prospects in one country and have spillover effects across regional indices. While this article avoids political debate, it is factual to state that legal or regulatory uncertainty can raise the discount investors demand for local assets — another clear reason international stocks fall.

Commodity price moves

Commodity price declines hit commodity exporters hard. Commodity exporting emerging markets — major oil, metal or agricultural producers — see revenue and fiscal pressure when prices fall, often causing currency weakness and equity declines in local markets.

Sector composition and leadership shifts

Index composition matters. International indices typically have higher weights to financials, energy and industrials, whereas recent US outperformance has been driven by a handful of mega‑cap technology stocks. If financials and energy lag while US tech surges, international indices can underperform even if the global economy is broadly okay.

Valuation re‑rating and investor sentiment

When investors rotate out of risk assets or de‑risk globally, they can compress valuations in markets that had been trading at higher cyclically adjusted yields or lower price‑to‑earnings multiples. Sentiment‑driven valuation re‑rating can permanently lower index levels if it leads to a structural shift in investor preferences.

Capital flows and technical/market‑structure effects

ETF flows, index rebalancing, margin selling and liquidity squeezes can amplify price moves. Large passive funds tracking international indexes may see outflows that mechanically force sales. Similarly, forced deleveraging in one market can propagate to others, which is why some episodes of why are international stocks down look fast and technical rather than fundamentals driven.

Country‑ or company‑specific events

Corporate governance failures, high‑profile bankruptcies, or the failure of a major index constituent can drag down a national index and, by extension, regional ex‑US benchmarks.

Regional and market‑specific factors

International markets are heterogeneous. The drivers listed above play out differently across regions.

Europe

European equities are sensitive to: ECB policy and its timing versus the Fed; bank sector health and non‑performing loan risk; industrial demand and trade exposure; and energy price shifts. Recessions or weak industrial PMI readings in major economies can reduce exports and corporate earnings, explaining episodes when European stocks fall relative to the US.

Asia (China, Japan, Korea, Taiwan)

• China: regulatory policy, property sector stress, GDP growth momentum and export demand are dominant. Chinese regulatory actions can hit specific sectors abruptly, and weak property investment has repeatedly explained periods when Chinese equities fell.
• Japan: corporate governance reforms, currency sensitivity (JPY moves versus USD), and export demand matter. A weaker yen can boost Japanese exporters' local‑currency profits but reduce dollar returns for some investors.
• Korea and Taiwan: heavy exposure to semiconductors and global tech demand makes them highly cyclical. A slowdown in global semiconductor cycle or lower capex from large customers can lead to rapid declines in these markets.

Emerging markets

Emerging markets (EM) are more sensitive to commodity cycles, global liquidity, US dollar moves and political/regulatory risk. EM currencies can be volatile; capital flight during global risk aversion episodes often amplifies equity selloffs. Because many EMs rely on external financing, rising US yields or a stronger dollar can reduce capital availability and deepen equity declines.

Short‑term (cyclical) vs long‑term (structural) causes

Understanding whether a downturn is cyclical or structural helps set expectations for recovery.

• Cyclical causes: PMI dips, earnings season misses, temporary trade frictions, or short‑run liquidity squeezes. These often resolve in months as data normalizes or central bank actions provide clarity.
• Structural causes: persistent demographic headwinds, sustained regulatory regimes that reduce profitability, or long‑term valuation gaps driven by productivity differences. Structural underperformance can last years and requires different portfolio responses.

When investors ask why are international stocks down, they should map observed drivers to this framework: is the shock a transitory earnings revision or a deeper credibility/fiscal shock that could change long‑term growth forecasts?

Indicators and data to monitor

A practical dashboard of indicators helps answer why are international stocks down in real time. Analysts and investors commonly track:

• US Dollar Index (DXY): measures broad USD strength or weakness.
• Yield differentials: 10‑year Treasury yield vs equivalent foreign government yields; the spread reflects interest‑rate expectations and term premium.
• PMI and GDP releases: high‑frequency signals of local growth momentum.
• Corporate earnings revisions: aggregated upward or downward changes in analyst EPS estimates are a forward‑looking signal for equity prices.
• Fund flows: net flows into/out of international ETFs and mutual funds; persistent outflows can signal structural sentiment shifts.
• Volatility indices: VIX for US equities, MOVE for rates volatility, and regional volatility measures.
• Currency moves versus the USD for major local currencies (EUR, JPY, CNY, BRL, INR): determine whether local returns are being masked by FX.
• Political and regulatory news feeds: sudden announcements that alter investor risk premia.

As of 16 January 2026, market reports highlighted the combination of tariff‑related fiscal uncertainty and central bank credibility concerns as immediate triggers for cross‑asset volatility; Polymarket prices showed ~73% odds of a court decision removing a tariff program, and commentary warned that a ruling could create material refund liabilities (estimates in public discussion ranged into the hundreds of billions). Such event risk shows up first in USD and rates indicators and then flows.

Investment implications and strategies

This section outlines common responses investors adopt when confronting the question why are international stocks down. This is educational and not investment advice.

• Diversify globally: a long‑term allocation across regions can capture rebounds and reduce single‑market risk.
• Currency hedging: hedged international ETFs or currency hedges can isolate local equity performance from FX noise when US‑dollar moves dominate.
• Rebalance to exploit valuation gaps: systematic rebalancing can buy cheaper international markets after drawdowns if fundamentals are intact.
• Use region‑specific ETFs or active managers: where country or sector exposures are complex, targeted products help express views.
• Size emerging‑market exposure prudently: EM can offer higher risk/return but greater volatility and currency risk.
• Liquidity and risk controls: set stop‑losses, monitor margin use, and prepare for elevated volatility — technical squeezes often worsen downturns.

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Notable historical episodes and case studies

Examples help show how the drivers above operate in practice:

• 2013–2014 USD rally: a period of dollar strength and Fed tapering fears led many international investors to see negative dollar‑returns from foreign equities even when local markets were flat.
• 2018 US‑China trade tensions: tariff announcements and trade uncertainty hit export‑heavy economies and slowed manufacturing PMIs, triggering declines in affected markets.
• 2020 pandemic shock: global liquidity actions helped stabilize markets, but early 2020 saw rapid international equity declines as supply chains and demand collapsed.
• 2022 rates‑led selloff: rapid global rate rises and a flight to quality caused broad equity declines; international markets with higher cyclical exposure often fell more than growth‑heavy US indices.

These real examples show that when investors ask why are international stocks down they should map the episode to which channels are active (FX, rates, earnings, flows).

Differing perspectives and common misunderstandings

Several misconceptions commonly obscure answers to why are international stocks down:

• Conflating local‑currency declines with fundamental weakness: local indices may be flat in local currency but fall in USD due to exchange‑rate moves.
• Assuming US outperformance equals superior fundamentals: strong US returns can be concentration‑driven (a few names) rather than broad economic superiority.
• Treating every drawdown as permanent: many declines are cyclical and reverse when the initial shock fades.

Careful analysis separates currency effects, earnings revisions and flow dynamics before concluding whether a decline is temporary or structural.

See also

• Currency risk and hedging basics
• MSCI indices and country classification
• Emerging‑market investing primer
• Global asset allocation frameworks
• How monetary policy transmits to equity markets

References and primary sources

• As of 16 January 2026, market reporting noted a pending court ruling on a major tariff program and flagged risks for fiscal receipts and market liquidity; see contemporaneous market commentary and exchange‑reported derivatives pricing for event odds and immediate market reactions.
• Polymarket trading implied roughly 73% odds of the court overturning the tariff program (market pricing as reported on 16 January 2026).
• Public commentary and research on term premium, MOVE (rates volatility index), and DXY dynamics frequently appear in investor dashboards. For practical monitoring, consult central bank releases, major economic data calendars, and ETF flow trackers.

All numeric estimates and event dates in this article are cited to market reporting dated 16 January 2026 where highlighted.

Further reading and tools

If you want to explore these signals in your own research:

• Track DXY and major currency pairs for real‑time insight into USD moves.
• Monitor ETF flows into and out of MSCI EM and ex‑US ETFs to see investor allocation shifts.
• Watch yield spreads between US 10‑year Treasuries and comparable foreign sovereign bonds.
• Use PMIs and quarterly corporate earnings as direct checks on activity and profit momentum.

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Practical checklist: If you’re asking "why are international stocks down" today

1. Check DXY (is the USD rising?)
2. Compare local‑currency index moves to USD returns (FX effect?)
3. Look at 10‑year yield spreads (are foreigners offering higher yields?)
4. Scan recent earnings revisions and PMI prints (growth/earnings signal)
5. Observe ETF flows and liquidity headlines (are outflows mechanical?)
6. Note any large legal or policy events dated today (event risk can cause rapid repricing)

A fast, systematic review of those six items usually explains the immediate drivers.

Final notes and next steps

Why are international stocks down is a multi‑layered question. Currency moves, monetary policy divergence, local growth and earnings, trade or tariff shocks, and capital flows all contribute. To evaluate whether a decline is transient or structural, track dollar strength, yield differentials, earnings revisions, and fund flows — and pay attention to dated market events.

As of 16 January 2026, market commentary highlighted tariff‑related fiscal uncertainty and central bank credibility headlines as immediate cross‑asset triggers. These examples illustrate how legal or policy events can suddenly change liquidity and prompt synchronized selling across stocks, bonds and crypto. When integrating crypto or token strategies with global equity analysis, secure custody matters: Bitget Wallet provides a simple entry point for users who want to manage tokens alongside traditional exposure, while Bitget offers exchange tools for traders and risk managers.

Explore these signals in your own research dashboard and consider educational resources to understand currency hedging and regional macro differences. To learn more about global markets, portfolio implementation and crypto custody options, explore Bitget’s educational materials and Bitget Wallet features.

Reporting date: As of 16 January 2026, market commentary and pricing data referenced in this article were reported by major financial news and market pricing services.