Will Australian stocks outperform Wall Street in 2026?
Billy Leung
For most of the past decade, while Australian investors watched the American S&P 500 rise, our ASX 200 lagged behind; weighed down by a heavy bias towards banks and resources and relatively little exposure to the global technology cycle.
The open question is whether this gap will widen again or whether conditions finally align for the local market to put up a stronger fight.
On the face of it, the US still retains the earnings advantage. Consensus indicates that the S&P 500’s annual earnings growth will be around 13 percent this year and closer to 15 percent in 2027.
The ASX 200, by contrast, is expected to grow at around 14 per cent annually in 2026, but only around 8 per cent the following year. This leaves Wall Street facing a growth premium, but that premium is narrowing.
And this contraction is important. When the earnings gap narrows, Australia is more likely to outperform, particularly in regions where our market is structurally overweighted. Currently, these areas are benefiting from various supporting trends.
The strength of gold, copper, lithium and uranium provides Australian miners with both a cyclical and structural headwind. Years of underinvestment, combined with rising global demand, have tightened supply. Electrification, grid expansion, energy security initiatives, and the massive development of AI and data center infrastructure are driving continued appetite for critical minerals.
Wall Street delivers durability, but ASX delivers cyclic torque. This year, investors may find they can have both.
When commodity prices strengthen in this environment, the impact is deeper than just increasing margins; materials are becoming one of the few industries globally with real forward earnings momentum. Given the ASX’s heavy resource weighting, the continued rise in commodities could carry the index.
BHP’s recent earnings have made this trend clear. For the first time, copper had the largest share in the company’s earnings, overshadowing iron ore. This marks a meaningful shift in Australia’s resource narrative: iron ore remains important, supported by Chinese demand for steel, but its dominance is increasingly being eroded as global investment turns to energy transition metals.
The rise of copper reflects the structural appeal of electrification, AI data center expansion and renewable infrastructure, while the growing strategic footprint of nuclear inputs such as uranium adds further depth. Iron ore is no longer the entire house, but remains the foundation.
Meanwhile, the United States is entering a different phase of its cycle. The first wave of the AI boom was dominated by a small core of hyperscalers and semiconductor giants. These companies remain extraordinarily profitable and continue to generate the free cash flow needed to fund major capital expenditures on data centers, chips, power and networks.
Increasingly, they look like digital services that provide the necessary infrastructure for the modern economy. But the market is beginning to expand as earnings growth spreads to companies that form the physical foundations of industry, energy, software and artificial intelligence.
This expansion is healthy for the longevity of the US rally, but it also means that returns from giants like Nvidia, which previously set the pace, may be less concentrated. As participation expands, the competitive gap between the US and other markets, including Australia, may narrow.
Interest rates will shape the backdrop but are unlikely to be the decisive narrative. If the Federal Reserve lowers interest rates this year, that will support equity valuations overall, but the more permanent driver will be how earnings vary across sectors.
In Australia, banks have already reaped much of the benefit from higher interest rates thanks to stronger net interest margins, and much of this now appears to be reflected in their share prices.
The latest earnings season confirmed this: Results across the big four banks were generally strong and ahead of expectations; margins stabilized at higher levels, asset quality became resilient, and capital positions supported dividends and buybacks.
But the market’s reaction suggested that much of this strength was expected, limiting further upside unless credit growth accelerates meaningfully. This once again shifts attention to areas that more clearly permeate global investment trends: miners.
The United States still has stronger total earnings growth, but Australia’s resource wealth puts it on the right side of some of the decade’s most important global investment themes.
While BHP’s copper-led result signals that energy transition metals are no longer a future story but today’s earnings driver, this positioning is already reflected in company performance.
If the commodity backdrop remains solid and the US rally continues to expand rather than intensify, 2026 could offer the best conditions in recent years for selective Australian outperformance.
Wall Street delivers durability, but ASX delivers cyclic torque. This year, investors may find they can have both.
Billy Leung is senior investment strategist at Global X ETFs.
- The advice given in this article is general in nature and is not intended to influence readers’ decisions about investments or financial products. They should always seek their own professional advice, taking into account their personal circumstances, before making any financial decisions.
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