January has already witnessed notable market volatility, reflecting a turbulent start to the year. Since Jan. 12, the CBOE Volatility Index has surged about 27% and is up roughly 31% since the start of 2026, which clearly shows the heightened volatility and uncertainty markets have been navigating since the start of the year.

Renewed transatlantic trade war rhetoric, combined with an already complex geopolitical backdrop, has added to U.S. market uncertainty, dampening investor appetite for domestic assets and prompting a redirection of capital away from the United States.

Investor behavior reflects a “Sell America” trade, driven by growing unease over Washington’s foreign policy direction. As quoted on CNBC, Ray Dalio warned that President Trump’s aggressive push to annex Greenland could prompt global investors to rethink their appetite for U.S. assets.

According to LSEG Lipper data, as quoted on a Reuters article, global equity funds attracted $45.59 billion in net inflows during the week ended Jan. 14, marking their strongest weekly net inflows in 15 weeks and continuing the positive momentum built toward the end of last year. Per the Reuters article, the MSCI World Index has gained about 2.4% so far in 2026, building on last year’s 20.6% rally.

The S&P World Index, which tracks the performance of stocks from 24 developed economies, has gained 17.58% over the past year and 0.07% in January so far, outperforming the S&P 500 over both periods and highlighting that broadening exposure to global equities may be a compelling strategy.

Global Bulls Take Charge as Growth Outlook Steadies

According to Bank of America’s survey, as quoted on Reuters, global fund managers have adopted their most bullish stance since July 2021, driven by rising growth optimism and cash allocations dropping to an all-time low of 3.2%. The bank’s Bull & Bear Indicator surged to a “hyper-bull” level of 9.4, while a net 38% expect economic conditions to improve.

The International Monetary Fund modestly raised its global growth outlook for 2026 recently, citing the ability of businesses and economies to adapt to U.S. tariffs, in its latest World Economic Outlook update, as quoted on another Reuters article.

Additionally, according to the World Bank, as quoted on Reuters, global output growth is expected to ease to 2.6% this year from 2.7% in 2025, before rebounding modestly to 2.7% in 2027. Per the World Bank, the global economy is showing greater resilience than previously anticipated, with 2026 GDP growth projected to come in slightly above forecasts made last June.

Uncertainty Reshapes Asset Allocation Beyond the U.S.

President Trump’s escalating push to acquire Greenland and the resulting opposition from European economies have raised the risk of a renewed transatlantic trade war,

In addition to renewed transatlantic trade war tensions, geopolitical tensions have accounted for the bulk of market volatility so far in 2026. U.S. military actions in Syria and Venezuela, and tensions in the Middle East and Asia’s major flashpoints, continue to elevate investor interest in global funds.

The situation is further complicated by ongoing tensions between President Trump and Fed Chair Jerome Powell, which have cast doubt on the Fed’s independence.

Easier Fed Policy and Dollar Weakness Support Global Equities

Volatility in the world’s biggest economy has comparatively decreased investor appetite for U.S. assets, weighing on both growth prospects and the U.S. dollar. A redirection of funds away from the United States reduces demand for the greenback, weakening it as a result and reducing its value.

Expectations of further Fed rate cuts in 2026 also add to the appeal of global equities. A weakening greenback further fuels interest in global equity funds. The value of the greenback is closely related to the Fed’s monetary policies. Its value tends to move inversely with the Fed's interest rate adjustments. Interest rate cuts by the Fed make the dollar less attractive to foreign investors, as these weaken it.

According to TradingView, the U.S. Dollar Index (DXY) has fallen 0.70% over the past five days and 8.62% over the past year. The index has recorded an all-time decline of 17.69%.

From Home Bias to Global Reach

For investors seeking to reduce exposure to U.S. assets, international equity ETFs offer a practical solution. With ETFs offering diversification and tax efficiency, adding international equity ETFs can provide additional benefits of broadening geographical exposure and strengthening overall diversification. Additionally, investing in international equity ETFs could also potentially boost risk-adjusted returns.

Those willing to take on slightly more risk can increase their exposure to emerging market ETFs, unlocking the potential for higher returns. Adding emerging market equity ETFs can broaden geographic exposure while enhancing overall portfolio diversification. Those willing to take on a modest increase in risk may further tilt toward emerging market ETFs to unlock higher return potential.

ETFs to Explore

International Equity ETFs

Investors can consider Schwab International Equity ETF (SCHF Quick QuoteSCHF - Free Report) , Schwab Fundamental International Equity ETF (FNDF Quick QuoteFNDF - Free Report) , Dimensional International Core Equity Market ETF (DFAI Quick QuoteDFAI - Free Report) and Avantis International Equity ETF (AVDE Quick QuoteAVDE - Free Report) .

International Dividend ETFs

Investors can also consider global dividend-focused funds. Dividend-paying securities serve as primary sources of reliable income for investors, particularly during periods of equity market volatility. Companies offering dividends often act as a hedge against economic uncertainty.

Investors can consider WisdomTree International Hedged Quality Dividend Growth Fund (IHDG Quick QuoteIHDG - Free Report) , iShares International Dividend Growth ETF (IGRO Quick QuoteIGRO - Free Report) and iShares International Select Dividend ETF (IDV Quick QuoteIDV - Free Report) .

Emerging Market ETFs

The Dow Jones Emerging Markets Index has gained 26.95% over the past year and 3.79% in January so far. Below, we have highlighted some funds that investors can use to gain targeted exposure to emerging market economies.

Investors can look at funds like iShares Core MSCI Emerging Markets ETF (IEMG Quick QuoteIEMG - Free Report) , Vanguard FTSE Emerging Markets ETF (VWO Quick QuoteVWO - Free Report) and iShares MSCI Emerging Markets ETF (EEM Quick QuoteEEM - Free Report) .