Are Investors Better Off Investing in International Stocks Than U.S. Stocks? Here’s What Experts Are Saying

Investors who’ve long relied on the strength of U.S. stocks are beginning to shift their focus toward international markets. The move comes amid growing concerns that American assets are becoming riskier, particularly in light of heightened trade tensions following tariff announcements by former President Donald Trump.

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Since the introduction of Trump’s tariff policy, the S&P 500 has declined over 6%, while the Dow Jones Industrial Average and the Nasdaq Composite have each dropped more than 7%. These losses have prompted some market watchers to reevaluate the traditional U.S.-centric approach to investing.

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Christine Benz, director of personal finance and retirement planning at Morningstar, noted that even before the recent volatility, investors had reason to consider reducing their U.S. exposure in favor of a more globally balanced portfolio. “But I think the case for international diversification is even greater now,” she emphasized.

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Jacob Manoukian, head of U.S. investment strategy at J.P. Morgan Private Bank, echoed that sentiment. In a recent research note, he described global diversification as a “prudent strategy,” especially in the current climate of uncertainty.

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For years, U.S. equities have outpaced their international counterparts, delivering consistent and impressive returns. From mid-2008 through 2024, the S&P 500 posted an average annual return of 11.9%, significantly outperforming developed international markets. By comparison, the MSCI EAFE index — which measures the performance of equities in developed nations outside the U.S. and Canada — delivered a more modest 3.6% annual return during the same period, according to J.P. Morgan analysts.

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Paul Christopher, head of global investment strategy at the Wells Fargo Investment Institute, believes investors shouldn’t be too hasty in abandoning U.S. equities. He describes the American market as still offering high quality and now looking relatively affordable.

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However, the tide may be turning. Analysts at J.P. Morgan Private Bank recently observed that the sharp drop in U.S. equities this year serves as a reminder of the importance of global diversification. While U.S. stocks have enjoyed a long period of dominance since the 2008 financial crisis, the recent market shifts suggest that this streak might not continue indefinitely.

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One major catalyst for this change in sentiment has been the Trump administration’s aggressive tariff strategy. The White House first introduced country-specific tariffs on April 2, and since then, markets have reacted negatively.

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Among the most notable moves was a steep 145% tariff on Chinese imports. As a result, the S&P 500 has fallen nearly 10% in 2025, while the Nasdaq is down more than 16%, and the Dow has slid by almost 8%. In contrast, the MSCI EAFE index has gained around 7% this year, highlighting growing investor interest in overseas markets.

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These developments have led some analysts to question whether the long-standing belief in “U.S. market exceptionalism” is beginning to fade. A recent note from Capital Economics suggested that U.S. assets may no longer be as appealing to foreign investors as they once were. The report hinted that the era of U.S. dominance in equity markets might be nearing its end.

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Simultaneously, rising trade tensions have also rattled the bond market and contributed to a decline in the U.S. dollar, which was nearing a one-year low as of Thursday. The rare combination of falling stocks, bonds, and a weakening dollar is a signal of deeper instability in the U.S. financial landscape.

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Former Treasury Secretary Janet Yellen expressed concern about the impact of the administration’s trade policies. Speaking on CNBC’s “Squawk Box,” Yellen said the uncertainty created by the tariffs has left American households and businesses unsure of what lies ahead.

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“It makes planning almost impossible,” she said, adding that this unpredictability is unsettling for the broader economy.

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Despite the current turmoil, it’s worth remembering that performance between U.S. and international equities has historically alternated in cycles. Data from Hartford Funds through 2024 shows that U.S. stocks and international stocks tend to take turns leading global markets, with each cycle lasting roughly eight years on average.

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By that measure, the U.S. — which has been in a leadership position for nearly 14 years — may be overdue for a period of underperformance relative to foreign equities.

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In summary, while U.S. stocks have delivered impressive returns for more than a decade, today’s environment has prompted many investors to reconsider the balance of their portfolios. With trade-related risks rising and American markets showing signs of strain, the case for international diversification is gaining traction once again.

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