Major Asset Classes January 2026 Performance: Commodities and Foreign Stocks Lead While US Assets Lag

This analysis is based on the Seeking Alpha report [1] published on February 2, 2026, which examined performance across major asset classes using ETF proxies. The January 2026 results reveal a notable shift away from US-centric investing that has dominated markets in recent years, with offshore assets benefiting significantly from US dollar weakness. Commodities emerged as the clear leader among all asset classes, while US bonds delivered the weakest performance at just +0.2% [2].

The performance divergence between international and US assets represents more than a monthly anomaly—it signals potential reconsideration of portfolio allocations that have remained heavily tilted toward domestic markets. US investors historically maintain international allocations of approximately 12-15%, despite international markets representing 30-40% of global market capitalization [6]. This structural underweight position may face pressure as investors recognize the valuation opportunities created by recent international outperformance.

The commodity complex delivered exceptional results in January 2026, with broad commodity exposure through the WisdomTree Commodity Index Fund (GCC) generating +10.7% returns—leading all major asset classes [2]. Within commodities, precious metals stole the spotlight: silver (SLV) delivered an extraordinary +44% gain, gold (GLD) returned +15.6%, and junior gold miners (GDXJ) approximated +20% returns [2]. Uranium miners (URNJ) also demonstrated remarkable strength at approximately +33%.

The precious metals rally reflects a convergence of factors including dollar debasement concerns, persistent central bank buying, and safe-haven demand amid ongoing policy uncertainty. Silver’s exceptional gain suggests both fundamental industrial demand and speculative interest, though such rapid appreciation historically carries elevated correction risk [3].

International equities benefited from both improving fundamentals and currency tailwinds as the dollar weakened. The Vanguard FTSE Emerging Markets ETF (VWO) returned +5.6%, while the Vanguard FTSE Developed Markets ETF (VEA) delivered +5.3% [2]. These returns substantially outperformed US domestic equities and attracted meaningful capital flows—VWO attracted over $500 million in late January alone, signaling renewed institutional and retail interest in foreign markets [5].

The performance gap between international and US equities—approximately 4 percentage points—represents a meaningful divergence that challenges the “US exceptionalism” narrative that has dominated investor thinking since 2022. Whether this represents a temporary rotation or the beginning of a sustained trend reversal remains an open question requiring monitoring of dollar dynamics and relative economic growth trajectories.

US equity markets produced modest positive returns, though with significant variation across indices. The Russell 2000 small-cap index was the best performer among major US indices at +6.14%, followed by Dow Jones Industrial Average at +2.57%, S&P 500 at +1.42%, and NASDAQ Composite at just +0.52% [2]. The Vanguard Total Stock Market ETF (VTI) closely tracked the broad market at +1.6%.

Within US sectors, Consumer Cyclical (+1.20%) and Consumer Defensive (+1.07%) led, while Communication Services (+0.07%) barely maintained positive territory and Utilities (-1.64%) declined [0]. The sector rotation into consumer and small-cap stocks suggests investors repositioning toward domestically-focused companies with less international exposure.

US bonds (BND) generated minimal returns of just +0.2%, reflecting ongoing sensitivity to Federal Reserve communications and the evolving interest rate outlook. The combination of weak bond returns and modest equity returns creates a challenging environment for traditional 60/40 portfolio structures.

The US Dollar Index (DXY) hitting near 4-year lows served as the central narrative driving January’s asset allocation shifts [4]. The dollar declined 1.89% over four weeks and 10.83% over the trailing twelve months, with the 98 level identified as critical technical support [7]. Several factors contributed to dollar weakness:

Federal Reserve policy positioning toward rate cuts provided fundamental support for dollar weakness, as narrowing rate differentials with other major economies reduced the dollar’s yield advantage [4]. Simultaneously, accelerating global de-dollarization trends—including central bank reserve diversification and increased bilateral trade settlements in non-dollar currencies—created structural headwinds for dollar valuations [4].

High US fiscal debt levels continued raising questions about dollar creditworthiness, while shifting trade policies and geopolitical tensions added uncertainty premium to dollar-denominated assets [3][4]. The dollar’s decline acted as a powerful tailwind for commodities priced in dollars, as reduced purchasing power for foreign buyers supported commodities demand while simultaneously providing currency translation benefits for foreign equity holdings denominated back into dollars.

January 2026’s performance pattern challenges the narrative of persistent US market outperformance that has characterized much of the post-2022 period. After years of domestic market dominance driven by technology sector leadership and the AI investment theme, investors appear to be diversifying across geographies and asset classes. This rotation may reflect recognition that concentrated US mega-cap technology exposure carries risks, while international valuations offer more attractive entry points following years of relative underperformance.

The small-cap Russell 2000’s strong performance (+6.14%) compared to the NASDAQ’s minimal gain (+0.52%) suggests investors rotating toward domestically-focused value and small-capitalization stocks. This shift could indicate anticipation of improved domestic economic conditions, greater benefit from potential policy changes, or simply portfolio rebalancing following technology’s prolonged dominance.

The exceptional commodity performance (+10.7%) and precious metals rally reflect growing institutional and retail interest in real assets as portfolio hedges against currency debasement and potential inflation resurgence. Gold’s structural support from central bank buying—particularly from emerging market central banks seeking dollar diversification—provides a foundation for continued precious metals demand beyond speculative flows [3].

The 33% gain in uranium miners and 44% rally in silver highlight how commodity rallies can extend beyond traditional safe-haven assets to industrial metals benefiting from supply constraints and energy transition demand. However, the magnitude of silver’s gain warrants caution, as such rapid appreciation historically precedes sharp corrections.

Growing awareness of US market concentration risk—the S&P 500’s heavy weighting toward a handful of mega-cap technology companies—may be driving some of the international rotation. Investors recognizing that domestic index exposure provides less diversification than intended may be actively expanding international allocations to achieve genuine global diversification [6].

The rapid appreciation in certain assets, particularly silver’s +44% gain, suggests elevated speculative interest that may not be sustainable. Historical patterns indicate commodity rallies often experience sharp corrections, especially when driven partly by currency hedging rather than pure fundamental demand [2][7]. Investors should be aware that performance divergence between US and international assets may not persist, and emerging market volatility remains elevated relative to developed markets.

Currency volatility presents a significant risk, as dollar weakness may reverse quickly on policy changes or shifting market sentiment. The Federal Reserve’s trajectory remains uncertain, and potential leadership changes (such as Kevin Warsh nomination) could impact monetary policy communications [3]. Interest rate sensitivity in bond markets remains elevated, with any sudden shift in Fed positioning capable of triggering meaningful repricing.

Geopolitical risks persist, including ongoing trade tensions and policy uncertainty that could disrupt commodity supply chains and international trade flows. These risks may create volatility in international equities and commodity-exposed investments.

The dollar’s decline to near 4-year lows creates potential entry points for international assets at more attractive valuations. For US-based investors with structural underweight positions in international equities, the combination of currency tailwinds and relative valuation opportunity may justify increased allocation toward foreign markets [6].

Real assets, particularly precious metals and commodities, continue to offer portfolio diversification benefits during periods of currency uncertainty. Central bank buying provides fundamental support for gold demand, while supply constraints in various commodity markets may sustain price gains beyond currency-driven movements.

Small-cap US equities, as indicated by the Russell 2000’s strong January performance, may benefit from domestic policy focus and reduced international exposure. The 6.14% gain suggests meaningful investor interest that could continue if the rotation toward domestically-focused companies persists.

January 2026 marked a significant rotation in global asset allocation, with commodities (+10.7%) and foreign equities (+5.3-5.6%) dramatically outperforming US assets (+1.4-1.6%). The US dollar’s decline to near 4-year lows served as a primary catalyst, benefiting dollar-denominated commodities and providing currency translation advantages for foreign holdings. This environment challenged the recent narrative of US market exceptionalism and may signal a broader shift in global capital allocation strategies. Investors monitoring this environment should watch DXY support levels, central bank gold buying patterns, treasury yield movements, and international equity fund flows for signals regarding the sustainability of this rotation.

Sector performance showed meaningful rotation, with Consumer Cyclical and Consumer Defensive leading US sectors while Utilities declined -1.64%. The Russell 2000’s strong small-cap performance contrasted sharply with the NASDAQ’s minimal gain, suggesting investor repositioning toward domestically-focused value exposure. US bonds remained weak at just +0.2%, limiting return opportunities in fixed income allocations.