“War serves as God’s means of educating Americans about geography.”
Frequently credited to satirist Ambrose Bierce, this statement resonates when we reflect on how locations like Kandahar, the Mekong River, and Normandy have become part of our shared awareness.
If we substitute “war” with “investing,” the essence remains. I began my career in the late 1990s amidst the “Asian contagion” unsettling markets in places like Bangkok, Kuala Lumpur, and Seoul. Subsequently, Russia’s debt default led to currency collapses in Brazil and Argentina. Years later, the investing community learned about the EU’s expansion, China’s “Special Economic Zones,” and Bangalore, India’s tech hub.
From the fallout of a global financial crisis linked to the US housing market emerged what is now known as “US exceptionalism” in investing. Currently, US stocks make up 63% of the Morningstar Global Markets Index, up from 40% in 2008. Notably, a single American company, Nvidia, now has a market value exceeding that of both Canada and the UK’s stock markets combined. Many US investors subscribe to the belief of Vanguard’s Jack Bogle that investing outside the US is unnecessary.
However, the performance of international stocks in 2025 has prompted some US investors to revisit their global investing strategies. The Morningstar Global Markets ex-US Index has outperformed the Morningstar US Market Index by over double in dollar terms since the start of the year.
For those of us who have maintained international equity investments over the years, it’s too early for triumph. The underperformance compared to US-centric portfolios has been significant, warranting a sense of humility. True validation will come with years of sustained outperformance. While investors are focused on global markets, it’s a fitting moment to reevaluate both tactical and strategic reasons for investing in international equities.
Reasons for Outperformance of International Stocks This Year
The depreciation of the US dollar against other major currencies in 2025 has benefitted unhedged US investors with foreign stocks. For instance, comparing returns of the Morningstar Europe Index in US dollars versus euros shows notable differences.
