International stocks are having a resurgence

After years of trailing U.S. markets, international equities are quietly outperforming so far in 2025. What’s driving this resurgence, and what should you do about it? 

Major international markets have all benefitted from a softer U.S. dollar, which amplifies foreign equity returns for U.S.-based investments. They’ve also seen positive momentum from various region-specific policy changes and economic reforms. 

In Europe, the main driver is a fiscal push: Germany and others are rolling out stimulus, boosting domestic demand and sentiment. Chinese markets are being helped by that country’s economic stabilization after a volatile stretch, along with broader signs of steadiness across emerging market prospects. In Japan, shareholder-friendly corporate governance reforms are gaining traction, spurring share buybacks, dividends, and broader confidence in listed companies. 

Even after this year’s run up in international markets, valuations outside the U.S. remain compelling—especially as global supply chains rewire and capital spending accelerates. International markets also offer exposure to sectors underrepresented in U.S. indexes. 

These improving fundamentals and discounted valuations mean that international stocks are potentially more than just a diversifier now. An overweight to U.S. equities still makes sense, as U.S. companies continue to lead on innovation, earnings quality, and return on capital—but it’s hard to argue that the global opportunity set hasn’t materially improved. 

Maverick Lin contributed to this article.