Vanguard's Other Index ETF Has Absolutely Destroyed SPY and VOO This Year | VXUS

"While most investors obsess over SPY and VOO, Vanguard Total International Stock Index Fund ETF Shares ( NYSEARCA:VXUS) has quietly delivered 29% returns through mid-December 2025, crushing the S&P 500's 15% gain. For a $558 billion fund charging just 0.05% annually, that outperformance represents billions in additional wealth for investors who looked beyond U.S. borders. The real story: international stocks achieved this despite mixed currency headwinds, suggesting local equity gains approached 25-30% in many markets."

"What Powered International Markets in 2025 The macro environment shifted decisively in favor of international equities. Earnings growth outside the U.S. accelerated throughout 2025, with companies like Royal Bank of Canada (VXUS's largest holding at 0.54%) posting 29% year-over-year earnings growth. This wasn't isolated. Canadian financials, European industrials, and Asian technology firms benefited from synchronized global growth and easing monetary policy outside the United States."

"Currency effects told a nuanced story. The Japanese yen weakened 3.3% against the dollar, amplifying returns from Japan's 15-20% portfolio weight. But the British pound strengthened 1.3%, creating a modest headwind for the 30-35% European allocation. That VXUS still outperformed by 3.3 percentage points proves the performance came from genuine business fundamentals, not just favorable exchange rates. Valuation compression also mattered. International stocks entered 2025 trading at significant discounts to U.S. equities."

VXUS delivered 29% returns through mid-December 2025 versus the S&P 500's 15%, for a $558 billion fund charging 0.05% annually. Earnings growth outside the United States accelerated across 2025, led by firms such as Royal Bank of Canada with 29% year-over-year earnings growth. Canadian financials, European industrials, and Asian technology firms benefited from synchronized global growth and easing monetary policy outside the U.S. Currency moves were mixed — the yen weakened 3.3% while the pound strengthened 1.3% — yet local equity gains remained strong. Valuation compression and forward P/E expansion in MSCI EAFE added further returns. Interest rate policy divergence will dominate the 2026 outlook.

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