Why are non-U.S. stocks outperforming the S&P 500 in 2025?

Non-U.S. stocks returned 33.1% in 2025, significantly higher than the S&P 500's 16.3%, partly due to a weaker U.S. dollar and their inherent value.

What is the CAPE ratio and why is it important for the US stock market?

The CAPE ratio compares stock market levels to 10-year inflation-adjusted earnings, revealing the U.S. market is significantly overvalued compared to international markets.

Are non-U.S. stocks expected to continue outperforming in 2026?

Yes, analysts predict non-U.S. stocks will likely continue their strong performance in 2026 due to their better value proposition compared to the overvalued U.S. market.

Home / Business and Economy / Non-US Stocks Outshine S&P 500: Value Beckons in 2026

Non-US Stocks Outshine S&P 500: Value Beckons in 2026

1 Jan

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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-US Stocks Outshine S&P 500: Value Beckons in 2026

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.