International funds and ETF’s have outperformed the SP 500 this year, primarily due to the weaker dollar.
This was the first year in a LONG time international has done this well, versus the SP 500.
(Click on the above spreadsheet to expand it for easier reading.)
Is there more “alpha” left in non-US asset classes ?
The 5-year annual returns have now moved into the low-double-digits, but note how the 10-year returns are all mostly single digit annual returns. The 10-year and 15-year returns are still quite paltry relative to the SP 500’s annual returns, from which we could reasonably expect more upside from the asset class.
This blog bought more of the EMXC ETF today, as the iShares MSCI Emerging Markets Ex-China ETF (EMXC) has now moved nicely ahead of it’s late 2021 highs in the low to mid $60’s and today broke above $70 per share for the first time. Emerging markets in general have had a decent year in 2025, but they have lagged international for a while and likely also have more upside on a relative basis to the US and international.
Not being a fan of China in any way, I’d much prefer to have no China exposure of any kind in client accounts, and the EMXC is one way to accomplish that.
This Y-charts graph shows the annual return on the SP 500 (total return) versus the EMXC since the EMXC started trading in September ’17.
The EMXC gave up almost 900 basis points in annual return versus the SP 500 in the last 8 years.
Time to play reversion-to-the-mean.
Summary / conclusion: Japan is another country that has broken out of it’s 34 – 35 year consolidation in the last 18 months. After peaking at roughly 38,000 in late December, 1989, the Nikkei has finally moved above that level. I can’t tell you how many times I’ve heard a brokerage firm “bull” Japan and the Nikkei in the last 30 years only to be sorely disappointed after the major Japanese benchmark went nowhere.
Now, you rarely hear a sell-side firm pushing Japan, and we have a breakout. Warren Buffett shocked a few people a few years ago buying shares of various Japanese financials, and I’m guessing it shocked a few people. The election of the new Japanese prime minister should be a plus since she is pro-growth and not a big fan of China (as I understand it).
International and now emerging markets are continue to look good, and should show decent “relative” performance as the US secular bull market enters its 15th – 16th year.
International investing is not without risk, so do your homework and try and look at established ETF’s and funds with a longer track record.
None of this is advice or a recommendation, but only an opinion. Past performance is no guarantee of future results.
Thanks for reading.