International Stocks Present a Compelling Opportunity

For more than a decade, U.S. equities have commanded much of investors' attention. Major American companies have delivered strong returns, technology firms have become globally dominant, and the depth and liquidity of U.S. markets have made domestic investing feel both familiar and sufficient.

That success can make international investing seem unnecessary.

Why look elsewhere when the companies most people recognize—global technology leaders, consumer brands, healthcare innovators, industrial giants, and financial institutions—are already listed in the United States?

The answer is not that investors should abandon U.S. stocks. It is that a portfolio concentrated in one country, no matter how strong that country's market has been, carries a form of risk that can be easy to overlook. International stocks offer exposure to different economic conditions, currencies, business models, population trends, and valuation environments. They can broaden the sources from which a portfolio may earn long-term returns.

For cross-border families, the case can be even more practical. A family may earn in U.S. dollars but expect to retire in Europe, support relatives abroad, pay for education in another country, or own property outside the United States. In those cases, global investing is not merely a portfolio preference. It can be part of aligning investments with real-life financial needs.

A global economy deserves a global portfolio

Investors often think of their portfolios in national terms: U.S. stocks, U.S. bonds, U.S. retirement accounts, and U.S. dollars. But the companies, customers, supply chains, and economic forces that shape investment returns are increasingly international.

A car manufacturer may source components from several countries. A pharmaceutical company may earn substantial revenue outside its home market. A technology firm may manufacture in Asia, sell in Europe, employ engineers around the world, and depend on global demand. Even businesses listed in the United States are affected by foreign currencies, overseas regulations, international competition, and global growth.

Still, owning a U.S. multinational is not identical to owning foreign markets directly.

A U.S.-listed company remains influenced by U.S. corporate governance, U.S. market valuations, U.S. investor sentiment, and the broader U.S. financial system. Direct exposure to international stocks can add companies whose primary customers, costs, management decisions, and economic drivers are based elsewhere.

For example, international markets offer exposure to:

• •European industrial, luxury-goods, pharmaceutical, and consumer companies.
• •Japanese manufacturers, automation businesses, and exporters.
• •Canadian financial, energy, and natural-resource companies.
• •Australian mining and infrastructure businesses.
• •South Korean technology and consumer companies.
• •Indian, Brazilian, Mexican, Indonesian, and other emerging-market companies tied to rising consumption, infrastructure, and local economic growth.

Diversification is the central argument

Diversification does not mean owning whatever performed best last year. It means avoiding excessive reliance on a single possible outcome.

A portfolio invested entirely in U.S. equities is exposed to the possibility that U.S. stocks experience a prolonged period of lower returns, high valuations, slower earnings growth, inflation pressure, interest-rate changes, or policy uncertainty. None of those outcomes would mean the U.S. economy has failed. But markets can underperform for extended periods even when a country remains innovative and economically important.

International markets do not always move in lockstep with U.S. markets. Economic cycles differ. Interest-rate decisions vary by country. Commodity prices may help one region while hurting another. Currency movements can benefit or reduce returns for U.S.-based investors. Different sectors lead at different times.

This imperfect relationship is why foreign stocks can help moderate concentration risk.

The benefit is not a guarantee of higher returns every year. In fact, international investments may lag U.S. stocks for long periods. Diversification works precisely because it accepts that no investor can reliably know in advance which region will lead next.

Consider two investors. One owns only U.S. large-company stocks because that market has been strong recently. The other owns U.S. stocks alongside developed-market and emerging-market equities. In a year when U.S. stocks lead, the first investor may outperform. But if leadership shifts toward Europe, Japan, emerging markets, commodity-producing countries, or markets with lower starting valuations, the globally diversified investor has more ways to participate.

The goal is not to win every calendar year. It is to build a portfolio that can remain durable across different market environments.

Valuations create a potential opening

One reason international stocks attract attention is valuation.

U.S. shares—especially large, high-growth companies—can become expensive after extended periods of strong performance. Higher valuations do not automatically mean a market is about to fall. Great companies can continue producing strong results, and expensive stocks can become more expensive.

But valuation matters for long-term expectations.

When investors pay a higher price for each dollar of a company's earnings, cash flow, or dividends, they may be accepting lower expected future returns than they would at a more moderate price. Conversely, markets trading at lower valuations can offer a more favorable starting point—provided investors remain patient and recognize that lower-priced markets can stay out of favor.

Recent market commentary has noted that international developed-market stocks have traded at a meaningful discount to the U.S. market on forward earnings measures. T. Rowe Price reported a 23% forward price-to-earnings discount for international developed markets relative to the S&P 500 as of March 31, 2026.

That statistic should not be treated as a prediction. A valuation discount does not tell an investor exactly when international stocks will outperform, or whether every country and company abroad is attractive. It does, however, suggest that investors may be able to buy exposure to a broad group of overseas businesses at lower relative prices than comparable U.S. market exposure.

For long-term investors, starting valuation is one of the factors that can shape future return potential. It is not the only one. Earnings growth, dividends, interest rates, corporate governance, productivity, demographics, and currency movements all matter. But when a portfolio has become heavily concentrated in a market that has risen sharply, valuation is a sensible reason to reassess—not necessarily to make a dramatic all-or-nothing shift.

Emerging markets offer growth—but also uncertainty

Emerging markets are often the most exciting part of international investing. They can include economies where incomes are rising, populations are younger, consumer spending is expanding, infrastructure is being built, and financial systems are becoming more developed.

These markets can offer exposure to long-term themes such as:

• •Growing middle-class consumption.
• •Urbanization and housing demand.
• •Digital payments and mobile connectivity.
• •Expansion of healthcare and education.
• •Manufacturing investment and supply-chain diversification.
• •Energy, materials, transportation, and infrastructure development.

Currency can help—or hurt—returns

When a U.S. investor buys international stocks, returns are affected by two moving parts:

The relationship is more precise than this simplified expression, but the concept matters. A foreign company's stock can rise in its local currency while the U.S. dollar strengthens against that currency, reducing the investor's return when converted back into dollars. The reverse can also occur: a modest local-market gain can become a stronger dollar return if the foreign currency appreciates.

Currency risk is not always a disadvantage. It is another source of diversification.

For an investor who spends only in dollars, currency movements can add volatility. For a family with future expenses in euros, pounds, Canadian dollars, yen, pesos, or another foreign currency, international assets may help create a closer relationship between some investments and future spending needs.

Suppose a family plans to retire in France but has all of its assets in U.S. dollars. If the euro becomes more expensive relative to the dollar, everyday expenses in France could consume more of the family's retirement income. Holding some globally diversified assets does not eliminate that risk, but it may reduce the degree to which the household's entire financial plan depends on one currency.

Currency should be considered in the context of the family's actual goals—not as a short-term trading opportunity.

How investors can gain exposure

Most long-term investors do not need to select individual foreign stocks or open accounts in multiple countries to invest internationally. Broad, low-cost funds can provide exposure to hundreds or thousands of companies across developed and emerging markets.

Common approaches include:

What investors should avoid

International investing can be useful, but the opportunity is often misunderstood.

The strongest reason to own global equities is diversification—not the belief that an investor can consistently identify the next country to surge. A disciplined approach generally avoids several common mistakes.

• •Chasing the best-performing country after it has already rallied sharply.
• •Treating emerging markets as a guaranteed source of high returns simply because their economies are growing.
• •Buying a foreign fund without understanding whether it is diversified, country-specific, currency-hedged, actively managed, or heavily concentrated in a few companies.
• •Overreacting when international markets underperform U.S. stocks for several years.
• •Ignoring taxes, account restrictions, currency needs, or reporting rules when investing from outside the United States.
• •Assuming that a U.S.-based multinational provides identical diversification to direct ownership of foreign markets.
• •Making a major allocation change based solely on headlines, election news, exchange-rate forecasts, or recent performance.

A long-term opportunity, not a short-term bet

International stocks do not need to replace U.S. holdings to play an important role in a portfolio. U.S. markets remain among the world's deepest, most innovative, and most influential. For many investors, they should remain a major part of long-term equity exposure.

"Major" is different from "exclusive."

International equities can provide access to different sources of earnings, different economic cycles, different currencies, and potentially more attractive valuations. They may also be particularly relevant to families whose lives, future expenses, or retirement plans extend beyond the United States.

The decision should begin with purpose. Are you trying to reduce a U.S.-only concentration? Build a portfolio that better reflects a global economy? Prepare for future spending abroad? Improve long-term diversification? Or simply avoid relying on the assumption that one market will always lead?

Once the purpose is clear, the implementation can often be simple.

For most long-term investors, international stocks are not about predicting the next winner. They are about acknowledging a basic reality: the world economy is larger than any one country, and a resilient financial plan should be broad enough to reflect it.