Unlocking Value: Deep Dives into International Equities

International equities have surged in 2025, challenging long-held assumptions and demanding a fresh look at portfolio construction. Investors now face a rare opportunity to recalibrate their strategies and seize undervalued global growth prospects.

Current Market Performance (2025)

The first three quarters of 2025 delivered eye-opening returns outside the United States. The MSCI ACWI ex-US Index posted nearly twice the return of the S&P 500, all while exhibiting lower volatility than major US benchmarks. Emerging and frontier markets led the charge, with technology, clean energy and commodities driving regional gains.

Country highlights include Mexico and Brazil each up about 30%, China’s key tech names fueling a 25% rise, Korea’s semiconductors powering a 43% gain, and Argentina’s political shift igniting a 64% surge in October alone.

Drivers of Outperformance in 2025

Several interlinked factors underpinned this remarkable rally. A weakening US dollar amplified returns for unhedged global investors, while international equities began the year at lower valuations than US peers. Earnings revisions abroad remained steady, in contrast to increased downward pressure on US corporates.

In many regions, accommodative monetary policy and reform-driven corporate governance improvements further bolstered confidence. Europe’s selective sectors—healthcare and renewables—shone despite political headwinds, while Asia’s manufacturing and consumer names thrived amid reopening tailwinds.

• US dollar weakness boosting translated returns
• Valuation gap offering catch-up potential
• Stable earnings outlook outside the US
• Sector leadership shifting to industrials and clean tech

Diversification and Risk Management

With correlations between US and international stocks still evolving, a balanced allocation can materially improve risk-adjusted outcomes. Portfolios underweighting global equities experienced higher drawdowns during regional rallies, underscoring the cost of home bias.

International diversification not only smoothed volatility in 2025 but also unlocked enhanced risk-adjusted returns. Many investors remain underallocated, with non-US stocks comprising only 20% of global benchmarks versus historical averages near 40%. Active management and region-specific strategies can further mitigate political and currency risks.

Country & Regional Deep Dives

Each market presents unique dynamics and thematic opportunities:

• Europe: Dividend-rich financials and healthcare names trade at reasonable multiples, offsetting slow growth and policy uncertainty.
• Asia: China’s reopening, India’s long-term growth story and Japan’s corporate reforms offer a diversified tech and old-economy blend.
• Latin America & Africa: Commodity dependence fuels volatility but provides exposure to rising global demand for metals and energy.

In Korea and Taiwan, semiconductors and AI hardware have powered regional indices to new highs. Japan’s corporate governance overhaul and shareholder return commitments have reignited interest in beaten-down industrials.

Thematic Playbooks

Aligning sector and regional themes can magnify returns while spreading risk:

• Old Economy vs Tech: Complement US tech dominance with European utilities and Japanese industrials.
• Clean Energy & Renewables: Europe’s pioneering companies and emerging markets’ solar and wind projects.
• Semiconductors & AI: Korea and Taiwan’s global leaders in chip manufacturing and next-generation hardware.

Looking Forward and Key Risks

Experts foresee international equities retaining an edge over the next decade, driven by valuation arbitrage, currency normalization and cyclical rotations. However, investors must remain vigilant:

• Policy shifts or geopolitical tensions could disrupt trade flows and currency regimes.
• Commodity shocks may amplify volatility in resource-dependent markets.
• Rising correlations could erode diversification benefits during global sell-offs.

Proactive monitoring of central bank actions and regional macro indicators will be crucial to navigate these headwinds. Tactical hedging and sector tilts can help preserve gains if markets reprice risk rapidly.

Conclusion: Strategic Allocation for the Next Decade

The 2025 outperformance of international equities is more than a fleeting trend—it reflects a structural rebalancing of global growth and valuation narratives. By embracing diversified country exposure and thematic insights, investors can position portfolios to capture future rotations and cushion against US-centric risks.

Rebalancing toward underweighted international segments, adopting active strategies where regional expertise matters most, and layering thematic tilts in clean energy, semiconductors and high-dividend sectors will be key to unlocking durable value. The global stage is set, and the time to act is now.