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So far in 2026, the U.S. stock market is delivering uninspiring results. The S&P 500 index is basically flat year to date (down 0.03%), while the tech-heavy Nasdaq-100 index is down 2.2%.
But if you look beyond the U.S., share prices are growing. The Vanguard Total International Stock ETF (NASDAQ: VXUS), a fund that includes thousands of stocks from companies in global markets, is up 9% year to date, outperforming both the S&P 500 index and the Nasdaq-100 index.
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And the rest of the world’s stocks have outperformed both of those U.S. benchmarks in the past year. The VXUS is up about 31% in the past year, compared to 12% for the S&P 500 index and 11.7% for the Nasdaq-100.
This recent outperformance by international stocks might not be a fluke. It could be a sign of sustainable strength. According to recent research from Vanguard, other countries’ stocks are likely to keep beating America’s for the foreseeable future. Let’s look at why international stock investing could be savvy move for 2026 and beyond.
Vanguard’s 2026 economic and market outlook projects 4.9%-6.9% average annual returns for the next 10 years for “ex-U.S. equities” (international stocks outside the U.S.). It only projects 4%-5% of average annual returns for U.S. equities. If Vanguard’s analysis is correct, international stocks are about to beat the U.S. by a significant margin for the next decade.
This is a surprising prediction. For most of the past 16 years since the Great Financial Crisis, U.S. stocks have strongly outperformed international. For example, ever since its inception in January 2011, the Vanguard Total International Stock ETF has gained about 67%, while the S&P 500 index is up about 429% in that timeframe.
The main reason why Vanguard is less bullish on U.S. stocks is that its research team believes U.S. tech stocks are already priced for exceptionally high earnings expectations. Even if the artificial intelligence (AI) boom successfully delivers strong productivity gains, bigger corporate earnings, and roaring economic growth, America’s AI stocks might already be pricing in those happy results. There might not be enough upside left in U.S. tech stocks.
Instead of tech stocks, Vanguard sees better risk/reward trade-offs in high-quality U.S. bonds, U.S. value stocks, and non-U.S. developed market equities (international stocks in countries with some of the most advanced, prosperous economies, like Japan, Canada and Europe).
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