In the first half of 2026, the U.S. stock market has been lackluster, with the S&P 500 index remaining flat and the Nasdaq-100 index down by 2.2%. However, looking beyond the borders of the U.S., international stocks have been thriving. The Vanguard Total International Stock ETF (NASDAQ: VXUS), which includes a wide range of global market stocks, has seen a 9% increase year-to-date, outperforming both U.S. benchmarks.
Over the past year, global stocks have outperformed U.S. indices significantly. The VXUS has experienced a 31% growth, compared to 12% for the S&P 500 index and 11.7% for the Nasdaq-100. This trend of international stocks outperforming U.S. stocks may indicate sustainable strength in the global market.
Vanguard’s research for 2026 projects average annual returns of 4.9%-6.9% for international stocks outside the U.S., while U.S. equities are expected to deliver 4%-5% average annual returns. This forecast suggests that international stocks may surpass U.S. stocks by a considerable margin in the next decade.
The rationale behind Vanguard’s less optimistic outlook for U.S. stocks lies in the belief that U.S. tech stocks are already valued based on high earnings expectations. Even with the potential benefits of the AI boom, U.S. tech stocks may have limited upside potential. As a result, Vanguard sees better risk/reward opportunities in high-quality U.S. bonds, U.S. value stocks, and non-U.S. developed market equities.
For investors looking to diversify their portfolios with international stocks, the Vanguard Total International Stock ETF offers a comprehensive solution. With holdings in over 40 countries and an expense ratio of just 0.05%, this fund provides exposure to a wide range of global markets.
While the U.S. economy continues to grow, the potential for further expansion in the AI sector, investors may still benefit from the diversification and growth opportunities presented by international stocks. Vanguard’s research indicates that international stocks could outperform U.S. stocks in the coming years, making them a compelling investment option for 2026 and beyond.
Before investing in the Vanguard Total International Stock ETF or any other fund, investors should conduct thorough research and consider all factors that may impact their investment decisions. It’s important to weigh the potential risks and rewards of international investing and consult with a financial advisor if needed.
In conclusion, the outlook for international stocks appears promising, with Vanguard’s research suggesting that they could outperform U.S. equities in the foreseeable future. By diversifying their portfolios with international stocks, investors can potentially benefit from the growth opportunities presented by global markets.
