Time to diversify? International stocks heavily outperform the U.S. in 2025

[World economy and business.]
Andrey Semenov

U.S. stock indices continue to hit record highs day after day, but when zooming out to the rest of the globe, many other markets are eating those returns for breakfast. It's been somewhat of an anomaly in 2025, given that the last time international stocks had their moment was in the 2000s. U.S. exceptionalism, global growth struggles, and wars in Europe and the Middle East all seemed to dominate market headlines until recently, making many investors question just exactly what is going on. _The most overbought global stocks so far this year_ [https://seekingalpha.com/news/4490701-the-most-overbought-global-stocks-so-far-this-year-greece-is-the-word]

_Snapshot:_ First off, many parts of Europe, Asia and Latin America have embarked on an easing cycle by cutting rates rapidly, while the Federal Reserve sat in wait-and-see mode and expressed hesitation over policy. While there might be less innovation in those markets, additional regulation, and problems like energy security - there has been somewhat more of a predictable environment there compared to trade and inflation uncertainty in the U.S. The noteworthy decline of the greenback in 2025 has also been a major tailwind for international stocks, especially for U.S. dollar-based investors. _Seeking Alpha's Country ETF Dashboard_ [https://seekingalpha.com/etfs-and-funds/etf-tables/countries]

Valuations are another factor that has seen money flow to areas outside America. U.S. equities have become expensive after years of solid gains (e.g., the Magnificent 7, tech stocks, etc.), compared to the lower price-to-earnings ratios available elsewhere. International diversification has also been on the radar, given serious spending happening abroad, like the military-industrial investment going on in Europe to boost readiness in the face of Russia's war in Ukraine.

[International Stocks vs. The U.S.]
Seeking Alpha

WILL IT LAST? "Context matters and predictions of future events – both bullish and bearish – are rarely both accurate and timely," Arthur Stein Financial writes in _International Stocks And Portfolio Diversification [https://seekingalpha.com/article/4817112-international-stocks-portfolio-diversification]_. "Instead of trying to predict which areas of the market will outperform others over a given period, we maintain a diversified portfolio that stands to benefit regardless of which areas of the market outperform with a disciplined rebalancing strategy that takes advantage of these moves."

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