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2025 Surprise: Global ETF Beats US Market Heavily
8 Dec
Summary
- International ETF delivered 29.6% return in 2025, nearly double S&P 500.
- European stocks surged due to Germany's major infrastructure spending.
- Weakening US dollar amplified foreign investment gains significantly.
After more than a decade of underperformance, international stocks delivered a strong showing in 2025, with one ETF significantly outpacing the S&P 500. The Vanguard International High Dividend Yield Index Fund ETF Shares (VYMI) returned 29.6%, nearly doubling the S&P 500's 15.6% gain, marking a notable shift from the "U.S. exceptionalism" narrative.
Several factors contributed to this turnaround. European stocks, a significant component of the fund, surged as Germany initiated substantial infrastructure and defense spending. Additionally, normalizing interest rates boosted European banks, and a weakening U.S. dollar provided an automatic tailwind for American investors in foreign markets.
The fund's inherent value proposition, including a low expense ratio of 0.17% and a dividend yield near 4%, also played a crucial role. Trading at a price-to-earnings ratio of approximately 13, it offered an attractive valuation compared to U.S. growth stocks, positioning it for continued investor interest.
