Investing Beyond Your Borders: Mastering International Opportunities

As investors seek growth beyond domestic markets, the remarkable performance of non-US equities in recent years demands attention. With global economies rebounding and policy tailwinds aligning, now is the time to explore diverse, high-potential asset classes around the world.

Global Market Performance

International stocks delivered unprecedented returns in 2025, outpacing US benchmarks by double digits. The Morningstar Global Markets ex-US Index rose 32% in dollar terms, compared to a 17% gain for the US market. Early 2026 momentum continued, with the international index up 6% in January versus 1.5% for the S&P 500.

Key performance highlights include:

• Non-US stocks returned 30% for the year as of mid-December 2025
• International equities outperformed US stocks by 17 percentage points in 2025
• Emerging markets up 17% earnings growth forecast over 2024–2026

Bridging the Valuation Gap

Despite recent gains, non-US equities remain attractively priced. Forward price-earnings ratios suggest they are still approximately 35% cheaper than US stocks. Many investors have funneled capital into US assets, even though the US accounts for only 65% of the global equity index and under 50% of world earnings.

This valuation gap poses a compelling case for diversification. By shifting a portion of portfolios toward undervalued markets, investors can potentially capture longer-term revaluation benefits as global growth and sentiment normalize.

Regional Investment Hotbeds

Different regions offer unique catalysts for growth. Europe’s combination of fiscal stimulus and monetary easing contrasts with emerging markets’ rapid earnings expansion.

• Europe: ECB interest rate cuts totalling 2.35% between mid-2024 and mid-2025, Germany’s $1.3 trillion spending package, Eurozone equities up 41.3%
• Emerging Markets: 17% projected earnings growth in dollar terms, standout economies include Brazil, China, and Mexico
• Asia-Pacific: Corporate governance reforms in Japan, Korea, and China boosting investor confidence

These regions combine policy momentum with structural reforms, creating diverse growth trajectories across developed and developing markets.

Sector-Specific Prospects

Certain industries are particularly poised to benefit from international trends. Financials, for example, trade at significant discounts in Europe, with banks at 9–10 times P/E versus higher US multiples. Return on equity has climbed into the low double digits, supported by improving profitability.

Defense and infrastructure also stand out. NATO members aiming for 4% of GDP on military spending and 1% on infrastructure are driving demand for companies like France’s Safran, Germany’s MTU Aero Engines, and Britain’s BAE Systems. These sectors reflect enduring themes in global budgets rather than one-off spikes.

Policy and Structural Tailwinds

After years of stagnation, many economies are embracing reforms. In Asia, corporate governance initiatives are deepening market integrity. Europe is boosting public investment for green energy and digital infrastructure. Emerging markets are forging stronger regional trade partnerships.

At the currency level, dollar diversification fueling performance is a notable trend. Central banks are reducing US Treasury holdings, and the dollar faces cyclical headwinds as global rate cuts materialize. This environment creates opportunities for assets denominated in other major currencies.

• Asia corporate governance reforms gaining traction
• Europe expanding fiscal capacity through public investment
• Emerging markets strengthening institutional frameworks

Crafting Your International Portfolio

Building a resilient global portfolio requires balancing growth, value, and risk. Start by identifying regions underrepresented in your holdings. Consider:

• Allocating funds to undervalued non-US equities to capture potential revaluation
• Blending developed and emerging markets for optimal diversification
• Targeting sectors with structural spending tailwinds, such as financials and defense

In practice, investors might combine broad international index funds with focused thematic strategies. Regular rebalancing ensures that emerging outperformance does not lead to unintended concentration. By blending strategic allocation with tactical adjustments, portfolios can seize sustainable opportunities across borders.

As global growth is forecast at 3.3% in 2026 and 3.2% in 2027, supported by accommodative conditions and private sector adaptability, the case for international investing has never been stronger. Whether the recent surge marks a lasting leadership shift or a cyclical blip, proactive diversification provides a clear path to harness global momentum.