VXUS sent international stocks soaring 21% in 2025, here’s what happens next in 2026

VXUS, the Vanguard Total International Stock ETF, has captured investor attention as international markets demonstrate remarkable resilience in early 2026. While the headline suggests extraordinary year-to-date gains, the reality reveals a more nuanced market picture with international stocks positioned for substantial outperformance following their strong 2025.

VXUS Crushed US Market Returns Throughout 2025

International stocks significantly outperformed their American counterparts during 2025, with VXUS delivering 21% returns while the S&P 500 gained just 17.7%. The broader MSCI All Country World ex-USA index advanced 29.2%, demonstrating the strength of non-US developed and emerging markets.

The Vanguard Total International Stock ETF provides broad exposure across developed and emerging economies by tracking the FTSE Global All Cap ex US Index. This approach captures thousands of international securities, giving investors instant diversification across Europe, Asia, and emerging markets without requiring direct stock selection.

Royal Bank of Canada, the fund’s largest holding at 0.54%, posted 29% year-over-year earnings growth, exemplifying the earnings momentum driving international performance. This strength extends across financial services, industrials, and energy sectors where international companies hold competitive advantages.

What Drove International Outperformance in 2025?

The international market surge stemmed from falling interest rates, currency weakening in the US dollar, and robust earnings growth across developed markets. In the first half of 2025, technology underperformance and dollar weakness created tremendous tailwinds for international investors holding VXUS positions.

Goldman Sachs Research economists expect sturdy global growth of 2.8% in 2026, substantially above the consensus forecast of 2.5%. This outlook supports continued momentum for international-focused funds as companies outside the US benefit from synchronized global expansion and favorable policy environments.

Forward P/E ratios for MSCI EAFE markets expanded from roughly 12x to 14x during 2025, indicating investor confidence in future earnings growth. These valuations remain attractive compared to US market multiples, suggesting international stocks may have room for additional appreciation if current earnings expectations materialize.

VXUS Performance Metrics and Investment Profile

Performance Metric	Value
2025 YTD Return	+21.0% (through mid-December)
Current Stock Price	$76.54 (January 2, 2026)
52-Week High	$76.54
5-Year Compound Annual Return	7.68%
Expense Ratio	0.08%

VXUS offers exceptional value for international investors with its ultra-low 0.08% expense ratio, among the cheapest options for global equity exposure. The fund trades with high liquidity and has attracted billions in assets, making it the go-to choice for diversified international equity allocation.

Dividend yield remains competitive, providing income alongside capital appreciation for long-term investors. The fund’s passive approach eliminates the risks of active management while capturing the complete international market return minus nominal fees.

2026 Analyst Outlook for International Stocks

Major financial institutions have turned remarkably bullish on international markets for 2026. Charles Schwab reports that international stocks significantly outperformed in 2025 and analysts project further double-digit gains throughout 2026, driven by falling interest rates, robust earnings growth, and reduced policy risks.

J.P. Morgan Global Research forecasts double-digit gains across both developed and emerging markets, with earnings acceleration expected to accelerate significantly. This contrasts sharply with consensus expectations for US markets, where valuations have already expanded dramatically following 2025’s magnificent performance.

Fidelity research indicates that non-US markets offer attractive valuations even after their 2025 surge. International companies have become more profitable, but their stock prices haven’t fully caught up to earnings improvements, suggesting room for expansion if economic conditions remain favorable.

Will International Markets Continue Their 2026 Triumph?

The critical question facing investors involves sustainability—can international stocks extend their winning streak through 2026? Multiple analysts suggest a resounding yes, citing macroeconomic tailwinds including falling interest rates globally, emerging market strength, and potential euro recovery against the US dollar.

Policy support across developed markets has shifted toward stimulus and growth, departing from the restrictive stance of recent years. This environment typically favors international equities, particularly in Asia and Europe where central banks have more room for rate cuts and budget flexibility.

“International stocks significantly outperformed the S&P 500 in 2025. Analysts project further double-digit gains for non-U.S. markets in 2026, driven by falling interest rates, robust earnings growth, and reduced policy risks.”

— Barron’s Research Team, Investment Analysis Division

The Valuation Advantage

Forward earnings multiples remain substantially below US market valuations, providing what many analysts characterize as a “valuation discount” for international investing. Unlike US mega-cap technology stocks trading at premium valuations, international companies in traditional sectors offer more conservative price-to-earnings ratios alongside improving fundamentals.

Should You Add VXUS to Your Portfolio in 2026?

Investopedia and investment professionals recommend VXUS as most appropriate for investors seeking diversification within a comprehensive, balanced portfolio for long-term wealth building. Rather than timing market movements, the focus should remain on consistent allocation to international equities.

Financial advisors increasingly suggest that 10-20% international allocation represents prudent portfolio construction, particularly for younger investors with multi-decade investment horizons. This exposure captures global demand and reduces concentration risk inherent in US-only strategies.

VXUS holds advantages for buy-and-hold investors through its low costs, tax efficiency (especially in retirement accounts), and automatic rebalancing toward market-cap weights. The ETF’s broad holdings reduce single-company risk while maintaining benchmark returns that reflect global economic growth.

Sources

• Yahoo Finance – VXUS performance data and earnings analysis
• Charles Schwab – International stocks market outlook for 2026
• Goldman Sachs Research – Global economic growth forecasts