This year has been a rocky year for stocks in general, but especially for the U.S. stock market. Many investors are beginning to ask, "is now a good time to consider investing in international stocks"? In this blog post we will answer this question and review many of the benefits of investing in international stocks.
Is now a good time to be investing in international markets?
If you have been keeping up with the global stock markets, you may have noticed a slight performance difference between international stocks and domestic stocks. As of the end of Q1 2025, the YTD performance for the S&P 500 is -4.27% while the performance for the MSCI EAFE index (a proxy for international stocks) is up 6.86%! A stark difference!
So, is now a good time for international stocks? Yes! Is it also a good time for domestic stocks? Yes! Those answers both are accompanied by the assumption that you are not investing for the short-term.
I think this year really represents the importance of investing globally and not just in the U.S. markets. But of course, don’t just take our word for it, let’s look at some charts, graphs, and data to back it up.
Periods of equity outperformance
No doubt, the US stock market has outperformed international markets in recent years. For over 15 years to be exact. But let’s take a look at the chart below that was put together by JP Morgan. In gray are the periods when the US markets are outperforming, and in purple are the periods when international stocks are outperforming. Notice any patterns? I don’t. Other than the fact that we see some periods when international has outperformed and some periods when the U.S. has outperformed. The length of time of the outperformance is totally random as is the degree of outperformance.
Not only is it good to have exposure to international stocks in case these “random” pockets of international outperformance happen (see YTD so far), holding international equities has been shown to improve the performance of your overall equity portfolio while reducing volatility, quite a nice combination.
International equities can carry the torch!
Below is a very interesting chart put together by Blackrock that shows international stocks tend to outperform when we see low returns in the U.S.
As you can see from the chart, when U.S. returns are below 4%, 100% of the time international markets have outperformed U.S. markets. 100%! This means, when the U.S. returns are lagging, international stocks can help carry the load in a portfolio. This is the trend we are seeing so far during 2025.
Which country outperforms and when
We always get the question, "so which country is going to outperform this year"? Frankly, your guess is as good as ours. The below chart emphasizes just how random a specific country's outperformance can be.
Sometimes this is dubbed, “the quilt chart”. You may have seen this before where the various squares are different asset classes (small cap stocks, government bonds, etc.). We can apply the same to international and domestic stock markets. The below chart shows the relative performance for US markets (in orange) compared to other countries. The highest returning market for a given year is on top of each column, the lowest returning market for a given year is on the bottom of each column.
Notice any patterns here? Other than the U.S. not being at the top of each column (or the same market being at the top of each column), I don’t!
Now that we have established the importance of investing globally, are international stocks right for you? This is something that is an individualized question and something we help our investors with each and every day. If you would like to learn more about investing internationally, please don't hesitate to contact us!