Investors say bonjour to international stocks

The bull market is going globetrotting.

For a decade, the US stock market handily outperformed the rest of the world. Now, however, the assumption that the USA always takes the gold is starting to change. In 2025, the MSCI Europe Value Index and Japan’s Nikkei 225 both jumped 26%, outperforming the S&P 500’s 16% return. This year the trend is only accelerating:

• So far, it’s been the worst year for US stock performance compared to international stocks since 1995.
• US investors have pulled roughly $52 billion from domestic equity funds since January, and added $26 billion into emerging markets.
• According to a Bank of America fund survey, investors are moving from US equities into emerging markets at the fastest rate in five years.
• South Korea’s KOSPI is the best-performing major index of 2026, up 41.66%, followed by Japan’s Nikkei, up 13.87%.

Zoom out: A weaker dollar is giving foreign markets a currency tailwind. At the same time, concerns that top performing companies in Big Tech are overvalued (an AI bubble) are also driving investors overseas. But, to be clear, this isn’t a total sayonara: Many global investors are still investing heavily in US equities.

Buy America, or bye America 👋

The good news for those seeking international exposure? Vanguard’s 2026 outlook projects 4.9% to 6.9% annual returns for the next decade for international stocks, and sees only a 4% to 5% return for US equities.

The flip side, however, is that now those cheap hidden gems abroad are far more expensive compared to a year ago—but that doesn’t mean there aren’t opportunities. Bank of America’s head of global emerging markets fixed income strategy, David Hauner, recently argued that currencies across most major EM economies remain attractive—particularly if the dollar continues to weaken.

“Valuations are also tight for emerging market credit but attractive for almost all major emerging market currencies,” he wrote in a note. “[L]onger-term, we believe investors are still under-allocated, with portfolio inflows over the last 10 years totaling just 0.5% of cumulative emerging market GDP.”

We’ll start packing our bags.—LB