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Non-US Stocks Outshine S&P 500: Value Beckons in 2026
1 Jan
Summary
- Non-U.S. stocks returned 33.1% in 2025, more than double the S&P 500.
- U.S. stock market shows extreme overvaluation based on CAPE ratios.
- Non-U.S. equities represent better value and are predicted to outperform.
Non-U.S. equities concluded 2025 with a remarkable 33.1% total return, more than twice the S&P 500's 16.3%. This outperformance was partly influenced by a declining U.S. dollar, but a deeper analysis reveals significant value in international markets.
Valuation metrics, such as the cyclically adjusted price-to-earnings (CAPE) ratio, highlight the overvaluation of the U.S. stock market. Data indicates that U.S. CAPE ratios are substantially higher than those of many other developed nations, suggesting international stocks offer a more attractive investment proposition.
Analysts predict that non-U.S. stocks will continue their impressive run into 2026. Even without further dollar depreciation, the inherent value and lower valuations of international equities position them as a stronger bet for future returns compared to their U.S. counterparts.
