^{A plunge in big tech weighed heavily on US equities, which were also hit by weak manufacturing data. Image: Bloomberg}

Global Equities Are Leading the Pack in 2025

For over a decade, U.S. markets have been investors’ go-to, offering exceptional returns and global confidence. From 2010 to 2024, the S&P 500 delivered an impressive annualized return of 14.2%, dwarfing the 6.5% annualized gain from the MSCI ACWI ex-USA Index, which tracks international markets excluding the U.S.

But 2025 has flipped the narrative.

So far this year, the MSCI ACWI ex-USA Index has surged 15.7%, compared to a modest 1.5% return from the S&P 500. This dramatic shift in momentum has many investors rethinking their portfolio strategy.

“We’re seeing a growing ‘ABUSA’ mindset — ‘Anywhere But the USA’ — among global investors,” says David Rosenstrock, CFP and Director at Wharton Wealth Planning. “Concerns over U.S. market volatility, political gridlock, and tighter monetary policy are driving capital toward international opportunities.”

Why International Stocks Deserve a Place in Your Portfolio

It might be tempting to stick with the familiar — especially if you’ve only invested during the long bull run of U.S. equities. But history tells a different story.

Between 2001 and 2010, U.S. stocks underperformed significantly, with the S&P 500 gaining only 15% cumulatively, while the ACWI ex-US index returned 71.5%. This kind of long-term leadership reversal is not rare.

“Markets are cyclical,” notes Amy Arnott, a portfolio strategist at Morningstar. “Periods of U.S. outperformance tend to eventually give way to international rallies. Long-term investors should be prepared for this natural rotation.”

Adding foreign equities also gives investors access to:

• Diverse economic cycles
• Varied central bank policies
• Unique sectors and growth stories
• Protection against U.S.-centric risks

“True diversification isn’t just about owning more stocks — it’s about owning different kinds of stocks across different geographies,” explains Marcos Segrera, CFP and principal at Evensky & Katz/Foldes Wealth Management.

How to Invest in International Stocks the Right Way

Investing globally doesn’t have to be complicated. Experts suggest the most effective approach is through broad, low-cost mutual funds or ETFs.

“A total international index fund can give you exposure to hundreds — even thousands — of companies across developed and emerging markets,” says Arnott.

Here are three main ways to go international:

1. Developed Market Funds:
   Target countries like Japan, Australia, the UK, Germany, and Canada. These tend to be more stable but may offer slower growth.
2. Emerging Market Funds:
   These focus on China, India, Brazil, and others. They carry higher risk but potentially greater long-term upside.
3. All-in-One Funds:
   Total international funds — such as those tracking MSCI ACWI ex-USA — blend both developed and emerging markets into one package.

Arnott warns against overconcentrating on any single region or country. “Chasing performance or trendy regions, like Asia Pacific or Latin America, often leads to poor timing and increased volatility,” she says.

Why Now Might Be the Time to Look Abroad

• The U.S. dollar has weakened in early 2025, making foreign investments more attractive to American investors.
• Central banks in Europe and Asia are beginning to loosen policy — creating potential tailwinds for local markets.
• China’s government stimulus is driving renewed optimism in Asian markets.
• Valuations in international markets remain below historical averages — meaning there’s room to grow.

According to Morningstar, the average price-to-earnings (P/E) ratio for U.S. stocks currently hovers around 21, compared to just 13–15 in Europe and emerging markets.

Final Takeaway: Start Small, Stay Balanced

Foreign equities aren’t a silver bullet, and experts caution against overhauling your portfolio. But gradually increasing exposure — even to the tune of 15–25% of your total stock holdings — can create meaningful diversification over time.

“Don’t chase returns,” says Rosenstrock. “But if you’re underexposed to global markets, this could be a great time to begin balancing your portfolio for the future.”