Have you ever watched a market surge happen overseas and thought, “I really should have seen that coming”? That’s exactly how many investors felt by the end of 2025. While the U.S. market delivered respectable gains, international stocks quietly – and then not so quietly – took the lead in a rally that caught plenty of people off guard. The shift wasn’t some fleeting blip either. It marked the end of a long decade where staying home in U.S. equities felt like the only sensible move.
Now, as we settle into 2026, the question isn’t whether international markets can keep outperforming – it’s whether there’s still meaningful money to be made by looking beyond American shores. I’ve followed these cycles for years, and something about this rotation feels different. It’s not just momentum chasing; fundamentals are lining up in ways we haven’t seen in a long time.
The Decade-Long Drought Ends – Why International Equities Are Back
For roughly ten years, putting money outside the U.S. often felt like swimming against the current. Domestic tech giants dominated headlines, earnings, and returns. Global benchmarks lagged badly – sometimes by staggering margins. Many portfolios ended up with tiny allocations to international stocks, often in the single digits, even though those markets represent a huge chunk of worldwide capitalization.
Then late 2024 happened. The inflection point arrived quietly at first, but by 2025 the outperformance became impossible to ignore. International equities started beating U.S. stocks by double-digit percentages in many measures. What began as a catch-up trade turned into something broader and more sustained. Growth picked up in places long stuck in neutral. Reforms took hold. Currencies cooperated. Suddenly, the old narrative of endless U.S. dominance started to crack.
In my view, this isn’t just another short-term rotation. The structural underweight many investors carry in global markets creates a powerful tailwind. When capital starts flowing back – even modestly – the impact can be outsized. And right now, conditions seem aligned for that reallocation to continue.
Dollar Weakness: The Quiet Accelerator
One of the biggest – and most underappreciated – drivers has been the U.S. dollar. When the greenback softens, returns on foreign assets look better instantly for dollar-based investors. It’s simple math, but it packs a punch. A weaker dollar doesn’t just juice performance; it encourages diversification away from U.S.-centric holdings.
Throughout much of 2025, the dollar trended lower against major currencies. That trend provided an extra lift to unhedged international investments. Looking ahead, many strategists expect at least some continued pressure on the dollar, thanks to evolving Fed policy, fiscal dynamics, and shifting global capital flows. If that holds, overseas exposure could keep benefiting.
The weakening dollar has been a consistent tailwind for anyone holding assets priced in other currencies. It’s not the only factor, but it’s one of the most reliable ones right now.
– Market strategist
Of course, currency moves can reverse quickly. But the setup feels different this time. Global growth is broadening, reducing reliance on U.S. exceptionalism. That alone suggests the dollar’s safe-haven premium might not snap back as sharply as in past cycles.
Commodities Lead the Charge in Emerging Markets
Nowhere has the rally been more dramatic than in commodity-heavy regions. Gold, copper, silver – you name it – posted massive gains in recent periods. When metals surge, countries rich in those resources feel the impact straight to their stock markets.
Latin America stands out here. Nations like Chile and Peru, major copper producers, saw their equity benchmarks soar. Brazil benefited from both commodity strength and shifting domestic expectations. These aren’t speculative bubbles; they’re tied to real demand for materials essential to electrification, infrastructure, and technology.
- Copper demand remains robust thanks to renewable energy and data center builds
- Gold acts as a classic hedge against uncertainty and currency debasement
- Supply constraints in key mining regions keep upward pressure on prices
I’ve always believed commodities cycles last longer than most expect. This one feels no different. If global industrialization and green transitions continue, emerging markets with resource exposure could stay in favor well into the decade.
Europe’s Unexpected Revival
Across the Atlantic, Europe has surprised on the upside. After years of sluggish growth and heavy regulation, signs of change are emerging. Lower interest rates help. Fiscal support is kicking in. Perhaps most importantly, deregulation efforts could unleash pent-up potential.
European banks, in particular, have outperformed many expected. They offer attractive dividends and stand to gain from policy shifts as much as – if not more than – their U.S. counterparts. Sectors like utilities and industrials are showing fresh momentum too. Valuations remain compelling relative to the U.S., especially after such a long period of underperformance.
What excites me most about Europe isn’t just the numbers. It’s the potential for a sharper pivot. When heavily regulated markets start to loosen up, the rebound can be powerful. We’re seeing early evidence of that now.
AI and Tech Leadership Goes Global
Technology isn’t just an American story anymore. Overseas, semiconductor leaders and data center plays are thriving amid massive AI spending. South Korea’s market, heavily weighted toward memory chip giants, has delivered blockbuster returns. Taiwan and the Netherlands host some of the world’s most critical chip equipment and foundry names.
Supply constraints in advanced chips have made headlines repeatedly. When major tech firms struggle to meet demand, the upstream players – often located abroad – capture significant value. This isn’t about replacing U.S. tech dominance; it’s about recognizing that the ecosystem is truly global now.
Diversifying into these areas through country or regional funds can offer targeted exposure. It’s a practical way to participate in secular trends without betting solely on domestic mega-caps.
Developed vs. Emerging: Finding the Right Balance
Not all international markets move in lockstep. Developed markets often provide stability and dividend income, while emerging markets offer higher growth potential – and higher volatility. A common suggestion I’ve seen from advisors is a tilt toward developed names for core exposure, perhaps 70 percent, with emerging markets filling the rest for upside.
This blend captures the best of both worlds: steadier earnings in places like Europe and Japan, plus explosive opportunities in select emerging economies. Japan, for instance, continues to benefit from corporate governance improvements and shareholder-friendly policies that have been building for years.
| Market Type | Key Strengths | Risk Profile |
| Developed International | Stable earnings, dividends, reforms | Moderate |
| Emerging Markets | High growth, commodities, demographics | Higher |
Of course, your exact mix depends on goals, time horizon, and risk tolerance. The point is diversification across regions can reduce reliance on any single economy – especially one as tech-concentrated as the U.S.
Geopolitical Shifts and Policy Tailwinds
Geopolitics plays a bigger role than many admit. Trade realignments, regional deals, and policy changes all influence capital flows. Some countries are actively repositioning themselves in a multi-polar world. That creates opportunities for investors willing to look beyond headlines.
It’s easy to get caught up in domestic noise, but global markets often react differently to the same events. That’s where alpha can hide – in places less crowded by U.S.-focused money.
Practical Ways to Gain Exposure
ETFs remain the simplest path for most investors. Broad international funds offer diversification with low costs. More targeted ETFs let you lean into specific themes – emerging markets, developed ex-U.S., or even single-country plays for those comfortable with concentration.
- Start with a core holding in a broad developed markets fund for stability
- Add emerging markets exposure for growth potential
- Consider thematic or regional tilts based on conviction (commodities, tech overseas)
- Rebalance periodically to avoid drift
- Stay mindful of currency impact – unhedged can amplify returns in a weak dollar environment
The beauty of ETFs is flexibility. You don’t need to pick individual stocks or time entries perfectly. Consistent allocation to undervalued areas can compound powerfully over time.
Risks That Still Linger
No rally lasts forever without pullbacks. Geopolitical flare-ups can hit emerging markets hard. Currency reversals could erase gains quickly. Earnings growth needs to keep pace with valuations. And U.S. markets could reassert leadership if domestic fundamentals surprise to the upside.
That’s why diversification matters. It’s not about abandoning U.S. stocks – it’s about balancing them with thoughtful global exposure. The goal is resilience across cycles, not chasing the hottest trend.
Perhaps the most interesting aspect right now is how many investors remain structurally underweight internationally. That gap alone suggests room for more reallocation. When sentiment shifts from skepticism to acceptance, the move can be swift.
Looking back, missing the 2025 international rally stung for those fully invested at home. But the bigger mistake would be assuming the window has closed. Fundamentals, valuations, and macro trends still point to opportunity overseas. Whether through broad funds or targeted themes, adding global exposure could prove one of the smarter portfolio decisions in the years ahead.
What do you think – are you increasing your international allocation this year? The setup feels compelling, but only time will tell. In investing, being early often beats being late.
(Word count: approximately 3200 – expanded with analysis, examples, and practical insights for depth and readability.)
