Can Vanguard's International High Dividend Yield ETF Outperform Again in 2026?

Core Insights - The Vanguard International High Dividend Yield ETF (VYMI) achieved a remarkable 38% gain in 2025, marking its best annual return since inception nearly a decade ago [1] - International stocks are gaining renewed interest as global trade tensions rise and economic slowdowns are observed in various regions, leading investors to reconsider their focus on growth stocks [2] Performance Analysis - The ETF's strong performance was influenced by the overall rise in investor sentiment due to the AI stock boom, which benefited tech and communication sectors [4] - Despite the tech rally, VYMI's top 30 holdings do not include any tech stocks, indicating that the tech boom was not a direct driver of its performance [5] - Geopolitical turmoil, particularly the "Liberation Day" tariffs announced by President Trump, created a risk-off environment that led to a rotation favoring international stocks [6] Market Dynamics - Investors perceived better relative value in international stocks compared to U.S. companies, especially in light of the financial implications of tariffs [7] - Although concerns regarding tariffs have eased, international stocks maintained their outperformance for the remainder of the year [7]