From January 1, 2015- December 31, 2024, the U.S. market outperformed international markets substantially. The MSCI EAFE Index, which tracks developed markets outside the U.S., averaged a compound annual growth rate of just over 5% during those years, while the S&P 500 Index averaged slightly over 13% for the same period.
With that kind of gap, it’s easy to see why many investors have become biased towards U.S. stocks. However, most investment advisors would consider it a mistake to invest all of your assets in any one country, including the U.S., since that can expose you to greater volatility and risk. In spite of the returns from 2015-2024, there are good reasons to include international investments in your portfolio.
First, 2025 and 2026 (so far) have seen a rapid change in where the best returns are. According to JP Morgan Asset Management, the MSCI EAFE Index had a total return of 31.9% in 2025 and 14.5% as of mid-August of this year, while the S&P 500 had a total return of 17.9% last year and 13.0% so far in 2026. In addition, emerging market stocks, as measured by the MSCI Emerging Markets Index, were up 33.6% in 2025 and are up another 22.3% YTD in 2026.That’s a meaningful outperformance by the international stocks over the past 20 months!
Second, the stock market has a long history, and investors would be wise to understand what that history tells us. Per JP Morgan Asset Management, the last 50-plus years have seen significant cycles of both overperformance and underperformance of U.S. stocks compared to the MSCI EAFE Index. Owning both can reduce your dependence on any one market’s performance and may lower volatility over time.
Finally, I will make the point that U.S. stock indexes like the S&P 500 and the NASDAQ-100 have become very heavily concentrated, with the top 10 holdings of each representing over 40% of the entire index. This concentration has been rapidly increasing. By adding companies from other countries to your portfolio, you are diversifying your holdings and building a more robust investment portfolio.
The takeaway from all of this information is simple: diversify. In this case, we are talking about diversifying by holding equities both inside and outside of the U.S. The evidence isn’t that international stocks will always outperform U.S. stocks, but that we don’t know which market will lead in the future.
How ever you invest your portfolio, invest smartly and invest well!
Larry Sidney is a Zephyr Cove-based Investment Advisor Representative. Information is found at https://palisadeinvestments.com/ or by calling 775-299-4600 x702. This is not a solicitation to buy or sell securities. Clients may hold positions mentioned in this article. Past performance does not guarantee future results. Consult your financial advisor before purchasing any security.
