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When building a diversified portfolio, there’s a good case to be made for including international stocks.

What Caught Our Eyes This Week

The Case for International Equities

International markets have been catching investors off guard in 2025, shrugging off tariffs and geopolitical tensions to soar ahead of U.S. markets—cutting into the lead that U.S. stocks built over them in 2023 and 2024. We think they can play a valuable role in a diversified portfolio for several reasons:

  1. They can help diversify U.S. market concentration. It’s no secret that the S&P 500 is dominated by a handful of companies, with the top 10 now representing nearly 40% of overall market capitalization.
  2. Even before this year, they’ve performed better than you might think. In fact, when excluding Nvidia, European and Japanese stock markets have outperformed the rest of the S&P 500 in dollar terms since the market low of October 2022.
  3. They can hedge against further U.S. dollar weakness. Dollar cycles tend to be multiyear trends. We don’t know whether the weakness we’ve seen will continue, but if it does, international stocks would benefit.
  4. The earnings outlook is supportive. Despite tariff threats, 2025 is shaping up to be a solid year of earnings for many international markets, with that strength projected to continue into 2026.
  5. They’re still cheap. Even after strong performance in 2025, the valuation discount to the United States is substantial.

One-Year Rolling Price Performance, S&P 500 Minus MSCI EAFE

CHART OF THE WEEK: Cerity Partners, JP Morgan Asset Management, FactSet, S&P Global. EAFE stands for Europe, Australasia, and the Far East. Chart as of 9/30/2025

Past performance does not guarantee future results.

Please read important disclosures here.