International Stocks Outperform U.S. Equities in 2025

In 2025, international stocks significantly outperformed U.S. equities, marking a notable shift in market dynamics. The S&P 500, which measures the broad U.S. stock market, recorded a return of nearly 18%, its third consecutive year of double-digit gains. However, the MSCI EAFE Index, which tracks international stocks from developed nations, achieved a remarkable return of approximately 32%, while the MSCI Emerging Markets Index, covering stocks from developing economies, posted a 34% return. This performance has prompted financial experts to recommend that investors consider increasing their international stock allocations.

'Nearly every investor' could benefit from adding international stocks, expert says—here's why

Several factors contributed to the superior performance of international stocks in 2025. The global economy experienced faster growth than the U.S. economy, with emerging markets like India and China showing particularly strong economic expansion. Analysts at Goldman Sachs anticipate that this trend will continue into 2026. Additionally, fiscal stimulus measures and increased defense spending in Europe bolstered returns in developed markets. Emerging markets, particularly in Asia, benefited from the growing interest and investment in artificial intelligence, which has spurred capital expenditure in these regions.

'Nearly every investor' could benefit from adding international stocks, expert says—here's why

Kristy Akullian, head of iShares investment strategy for the Americas at BlackRock, emphasized the importance of diversifying portfolios to include international stocks. She noted that many U.S. investors are heavily weighted towards domestic equities, which creates a significant country bias. "We know that most U.S. investors are very overweight U.S. equities," Akullian stated, suggesting that increasing exposure to international stocks could help balance portfolios.

'Nearly every investor' could benefit from adding international stocks, expert says—here's why

Jeffrey Buchbinder, chief equity strategist at LPL Financial, echoed this sentiment, highlighting the impact of the U.S. dollar's decline on investment strategies. He remarked, "If the dollar continues to break down, the first thing we'd look to do is to add international [stocks], because the dollar is such a key piece of that equation." This perspective underscores the potential benefits of investing in international markets, particularly in a fluctuating currency environment.

'Nearly every investor' could benefit from adding international stocks, expert says—here's why

The strong performance of international stocks in 2025, driven by global economic growth and sector-specific advancements, presents a compelling case for U.S. investors to reassess their portfolio allocations. As experts advocate for increased international exposure, the ongoing trends in currency valuation and economic expansion may further influence investment strategies in the coming year.

'Nearly every investor' could benefit from adding international stocks, expert says—here's why