Investors Ditch US Stocks As International ETFs Hit 52-Week Highs, Here's What's Driving The Portfolio Pivot

A slew of US-listed international ETFs hit 52-week highs on Wednesday, highlighting a growing investor interest shift toward global equities amid shifting macroeconomic tides and geopolitical realignments. Among the top performers were the Schwab International Equity ETF SCHY, Vanguard Total International Stock ETF VXUS, Vanguard FTSE Developed Markets ETF VEA and Vanguard FTSE Europe ETF VGK, all of which reached new 52-week highs. Their jump is part of a larger trend: investors are increasingly directing their portfolios toward developed overseas markets, wanting both diversification and performance advantage as U.S. stocks lag.

Also Read: 3 Global ETFs Taking Off As US Economy Falters

International Edge

Throughout most of the last decade, global equities were the wallflowers at the international investment dance, present but rarely chosen. All that is changing quickly. The iShares All Country World Index ETF ACWI, widely regarded as a global equity bellwether, is ahead by more than 5% this year to date, while the S&P 500 has risen a paltry 0.5%. Increasing outperformance has prompted speculation about a so-called “Sell America” trade, sparked by Moody’s recent downgrade of America’s credit rating, with investors redirecting capital from U.S. markets to opportunities abroad.

“The global trade landscape is shifting. U.S. policy decisions are increasingly disrupting long-standing trade flows. If the U.S. turns inward, those opportunities will likely be backfilled by regional champions in countries like Japan, the U.K., Canada, and Australia,” Bancreek Capital CEO Andrew Skatoff told Benzinga earlier this month. The end result? A growing valuation differential between the U.S. and global markets that many believe is ready for alpha creation.

Tailwinds Behind The Trend

A number of drivers are fueling this global shift.

Valuation Discounts: International developed markets continue to be discounted compared to U.S. equities and present a compelling entry point for long-term investors.

Geopolitical Realignment: Concepts like supply chain regionalization and de-globalization are driving the emergence of regional economic giants.

Macroeconomic Momentum: European equities, for instance, are experiencing robust year-to-date results. The Euro Stoxx Index is rallying around 11% in dollar terms, with certain Eastern European markets such as Poland rising 40–50%, says Neil Azous, CIO of Rareview Capital.

Rareview Capital founder and CIO Neil Azous said in a recent interview with ETF Report that if you still believe in global diversification after all these years of it not really seeming to work, this could be your time.

Early Innings, Long Game

Despite the performance uptick, many analysts view this rotation as still in its early stages, with a long way to go. Azous said that U.S. market caps dwarf those in Europe, so even modest inflows can significantly move the needle.

In addition, the power of higher corporate profits offshore is still largely unrealized. If European and other foreign companies start reporting significant earnings growth, Azous believes the trend could shift from a tactical asset positioning change to a full-fledged secular rebalancing.

A Strategic Rebalancing

Outside of short-term outperformance, the move into international ETFs reflects a more fundamental rethinking of portfolio construction. Following decades of U.S.-focused investing, many asset managers are rebalancing to find more robust, geographically diversified portfolios, a strategy bolstered by shifting economic realities and cross-border investment flows.

Thus far, the global ETF rally is more than just the result of performance, it is a sign of a sea change in investor sentiment. If global markets continue to break away from U.S. underperformance, the trend might not only persist but intensify, one regional breakout after another.

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