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

Core Insights - U.S. investors exhibit a strong home country bias, with portfolios heavily weighted towards domestic stocks, often exceeding the U.S.'s 60% share of global market capitalization [2][3] - Vanguard's 2026 market outlook suggests modest returns for U.S. equities at 4% to 5% annually, while international stocks are projected to perform better with returns of 5% to 7% [4] - The high cyclically adjusted price-to-earnings (CAPE) ratio of 37.92 indicates that high starting valuations are historically linked to lower future returns [5] Investment Strategies - Investors can diversify globally without overhauling their portfolios by using low-cost ETFs, such as the Vanguard Total International Stock ETF (VXUS), which has an expense ratio of 0.05% and provides exposure to over 8,700 stocks [6][7] - VXUS offers comprehensive global diversification, covering both developed and emerging markets, while the Vanguard International High Dividend Yield ETF (VYMI) appeals to income-focused investors with higher yields and lower valuations [8]