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Foreign Stocks Are on a Roll. They Could Lift the 60/40 Portfolio

1. International stocks are outperforming U.S. stocks in 2025 with more than 25% returns. 2. A weaker dollar boosts international profits for U.S. investors significantly. 3. Funds like Vanguard LifeStrategy Moderate Growth perform better with international exposure. 4. Diversified portfolios benefit from foreign stocks amidst U.S. economic slowdown. 5. Foreign stocks trade at lower valuations than the S&P 500, suggesting growth potential.

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FAQ

Why Bearish?

With international stocks outperforming, capital may shift from SPY to EAFE stocks, reducing SPY demand. Historical shifts toward international equities, especially during currency depreciations, have often led to bearish trends in major U.S. indices.

How important is it?

The strong performance of international stocks coupled with a weakening dollar indicates a potential trend of capital flight from U.S. stocks, directly impacting SPY's attractiveness.

Why Short Term?

The immediate effects of capital reallocations usually reflect in U.S. markets quickly, especially with current weaknesses in the dollar and interest rates.

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