Vanguard's Own Research Says International Stocks Will Beat the US for the Next Decade. Here Is How to Position.

"U.S. investors tend to have a strong home country bias, with portfolios heavily tilted toward domestic stocks, often exceeding the U.S.'s 60% share of global market capitalization."

"Vanguard's latest 2026 market outlook projects modest returns for U.S. equities at 4% to 5% annually, while international stocks are expected to perform better at 5% to 7%."

"The cyclically adjusted price-to-earnings ratio, or CAPE ratio, currently sits at 37.92, one of the highest readings on record, indicating lower future returns for U.S. equities."

"Investors can add international exposure through simple, low-cost ETFs, such as the Vanguard Total International Stock ETF, which provides access to over 8,700 stocks."

U.S. investors typically favor domestic stocks, often exceeding the U.S.'s 60% share of global market capitalization. This bias is supported by familiarity and historical performance. However, Vanguard's 2026 market outlook predicts modest U.S. equity returns of 4% to 5% annually, while international stocks may yield 5% to 7%. High valuations, indicated by a CAPE ratio of 37.92, suggest lower future returns for U.S. equities. Investors can diversify with low-cost ETFs like the Vanguard Total International Stock ETF, which offers broad international exposure.

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