By Steve Garmhausen

It has been a challenging year for U.S. stocks, with the S&P 500 flat amid rich valuations, index concentration, and a weaker dollar. Meanwhile foreign equities' 2025 success against U.S. stocks has continued: The iShares MSCI ACWI ex U.S. ETF, which beat the State Street SPDR S&P 500 ETF Trust by eight percentage points in 2025, is ahead by more than seven points so far this year. It's quite a turnabout after nearly two decades of U.S. stock dominance, but the question is how long it will last. For this week's Barron's Advisor Big Q, we asked investment professionals whether they're continuing to allocate more to foreign markets.

David Bailin, founder, CEO, The CIO Group: From the beginning of last year until the end January this year, we increased our non-U.S. equity exposure by 5% and we are now 21% international. The international outperformance last year was related to the dollar, and incrementally to the relatively inexpensive nature of international stocks. What's going on this year I think is different. Everyone assumes that no matter what the Supreme Court rules on tariffs, the administration will find other tariff rules to utilize. Tariffs make the U.S. less competitive with the rest of the world. And I think we're dealing with a second wave of activity that is going to allow the international investing trend to continue.

Ninety-two percent of data are stored with U.S.-based companies; 60% of liquefied natural gas imports come from the United States. Over 95% of all payment activity is covered by U.S. companies. And of course trade is denominated in dollars. With no indication that the U.S. is going to change policy direction, the movement of governments and business outside the United States to non-U.S. solutions is the second wave. You can view this as somewhat of a structural shift. That's not to say it can't change after the Trump administration leaves, but it's likely to stay during the whole time he is in office.

For investors not to have international exposure now would be silly on several levels. One, the dollar's decline is only hedged by nondollar assets. Two, the investment opportunities that are going to be available outside the United States were created by this circumstance. Just as the U.S. has invested in certain companies like Intel or USA Rare Earth, we're going to see foreign governments get involved in incentivizing the creation of these alternative businesses. I think that's going to benefit those companies significantly. I think U.S. investors have to look at foreign investments both as an opportunity and a hedge.

Stephen Tuckwood, director of investments, Modern Wealth Management: Most U.S. investors have a home bias in public equity. We were underweight [international stocks] last year, and that worked against us. Coming into the year, we moved our ex-U.S. equity allocation to be in alignment with our strategic benchmark for public equities, the MSCI ACWI Investable Market Index.

There's still a valuation gap, some of it warranted, though it started to close last year and continues to close this year. One interesting nugget that we pondered is that it's really been value outperforming growth outside of the United States, whereas over here it's been mega-cap tech pushing things higher and higher until recently. We don't have any single-country tilts on currently in our flagship series but we are tilting toward quality and value at the developed-ex-U.S. and emerging-markets level.

Ken Roban, wealth manager, Steward Partners: I think "sell America" is a bit extreme. From our perspective, the U.S. is always going to be a great place to invest. We've got the most dynamic economy in the world. But from a risk and opportunity perspective, we think it makes a heck of a lot of sense to continue having international exposure and adding to it.

U.S. exceptionalism had been a dominant theme over the past decade. As an addendum to this narrative, a lot of people were saying China was uninvestible and Europe was dead. When that kind of narrative takes hold, it ultimately shows up in valuations: The valuation gap between U.S. and foreign equities became so wide that some normalization was overdue. As I see it, we're now in a period of mean reversion.

The valuation gap between U.S. and foreign stocks still persists. And foreign stocks also have a bigger dividend yield, and that's one of my favorite stats. The U.S. still dominates global stock market capitalization, but it's just 26% of global GDP. So there's still a disconnect. You still have cheaper international stocks. You don't want to abandon U.S. exposure. You just have to be thoughtful about the exposures that are within your portfolio. Valuation matters, and diversification is still very important.

Ryan Dykmans, president, chief investment officer, Dunham & Associates Investment Counsel: Our stance is that it's important to have a meaningful exposure to foreign stocks. We've had between 30% and 35% exposure pretty consistently for the past five-plus years. We've been stressed in terms of the U.S. continued outperformance, which finally reversed. We don't think that reversal is over. Because of that we have added to things like emerging market stocks, and we've reduced outperforming U.S. equities where we can.

There was a lot of euphoria that drove up U.S. markets, and I do hear the sell-America trade resonating a little bit, but we think it's more "trim America." We think there are still a lot of positive themes supporting the U.S. trade. But some of these valuations are basically pricing in perfection. I think a lot of investors have seen that and said, what happens if things aren't perfect? They're realizing that could be detrimental, meaning a 20% or 30%-type decline. And they're thinking, let's get into things that haven't run up as much. We like Europe as well as emerging markets. Take an active approach, being very selective even about sector exposures within countries.

Neale Ellis, founding partner and co-CIO at Fidelis Capital: A lot of U.S. investors' returns in international markets have been currency driven, and that has almost always been true. In fact a lot of the diversification you get from international stocks is really a currency play. And currency is a hard one to call over the long term. I can think of reasons why the dollar weakens, but I also think about reasons why it would strengthen, which people aren't expecting. I do suspect the dollar's going to weaken, so I think there's some support there tactically, but we generally try to first find structural and thematic reasons to be in a market. That's more of a long-term approach.

What drives GDP growth or productivity growth in a region is generally technological advances, innovation, and demographics. When we look at the world from a technology standpoint, the U.S. is a clear winner. Just compare index exposure to tech in the U.S. versus overseas, and you'll see it's dramatically higher in the U.S. And of course that has big implications for productivity and the country's ability to continue to innovate.

I think the U.S. also has some advantages from a demographic standpoint. Parts of the emerging market world are very advantaged -- parts of the Pacific Rim ex-China, or parts of South America. But right now I would still say buy America, while looking to opportunistically add parts of emerging markets.

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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February 18, 2026 15:23 ET (20:23 GMT)

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