Valuations in overseas markets jumped sharply while remaining cheaper than U.S. stocks.
Americans who put money in foreign stocks last year did way better than those who stayed within the home market. An exchange-traded fund tracking the MSCI all-country world ex-U.S. index brought in roughly 33% returns to U.S. investors in 2025.
“De-dollarization” was everywhere in 2025. Concerns about U.S. government spending and political turmoil sent investors looking elsewhere. Foreign stocks got attention. So did gold and crypto.
Japan’s MSCI index returned around 25% in 2025 despite the yen staying flat against the dollar. South Korea’s benchmark soared about 100% in dollar terms. Spain’s index climbed more than 60% in euros alone.
Valuations drove a lot of this, Goldman Sachs found. Investors paid more for each unit of earnings in these markets.
Take the price-earnings-growth ratio. The gap between U.S. and international PEG ratios narrowed by almost a third through mid-December 2025, according to Goldman Sachs. American stocks still traded at a premium. By mid-December, that premium stood at more than double the average since 2005.
Some analysts expect the gap to keep closing. Yardeni Research recently said it “no longer makes much sense” to recommend clients “overweight” U.S. stocks. The firm had given that advice since 2010. International stocks look cheaper based on forward price-to-earnings ratios. Plus, corporate earnings globally have stayed solid.
“It’s a big world with many countries having large populations that aspire to a better standard of living. Globalization isn’t dead,” Yardeni Research wrote.
Banks and financial companies make up the biggest chunk of the MSCI all-country ex-U.S. benchmark. But here’s something interesting – the top five individual stocks are all tech companies. Taiwan Semiconductor Manufacturing, the Netherlands’ ASML, China’s Alibaba and Tencent, and Korea’s Samsung Electronics.
Does this mean international stocks don’t really diversify away from America’s tech-heavy market? Peter Oppenheimer, Goldman’s chief global equity strategist and head of macro research in Europe, says not necessarily. Tech stocks started moving more independently in 2025, he noted. Picking winners got riskier because you’re more likely to pick a loser.
“What you should be doing is seeking more diversification within tech,” Oppenheimer says.
Nobody can predict what 2026 will bring. Maybe the dollar strengthens. Foreign earnings could stumble. U.S. valuations might shift. But the odds of everything moving together are slim. That’s the whole point of spreading bets globally – the advantages come from different directions.
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