Core Insights - Wall Street investors are accelerating the shift of funds towards international markets due to high valuations in the US stock market, a weakening dollar, and emerging opportunities abroad [1][2] - In January, net inflows into international stock ETFs reached $51.6 billion, marking a significant increase since the end of 2024 [1] - Global indices have outperformed major US benchmarks this year, with the MSCI ex-US index rising 29% last year, significantly surpassing the S&P 500's 16% increase [1] Group 1: Valuation and Dollar Influence - High valuations and a depreciating dollar are the main drivers of capital outflow to overseas markets, with the dollar down approximately 10% from its peak in 2022 [2] - The decline in the dollar enhances the return potential of foreign stocks relative to US companies [2] - Investment professionals are increasingly attracted to lower valuations in European and Japanese stocks, indicating a potential turning point in market dynamics [2] Group 2: Catalysts in Overseas Markets - Investor optimism is bolstered by various developments abroad, including fiscal stimulus in Japan and increased military spending in Europe [3] - The Nikkei 225 index in Japan reached a new high following a victory for Prime Minister Fumio Kishida in a recent election [3] - Some traders are seeking better opportunities outside of the high-priced domestic stocks, aiming for diversification away from US-dominated indices [3] Group 3: Distinction from Previous "De-risking" Trends - Recent foreign stock purchases are not a continuation of last year's "de-risking" trend, where global investors sold off US stocks and assets [4] - The previous trend was characterized by a significant drop in the dollar amid tariff turmoil, contrasting with the current balanced approach to international allocations [4] - Investment professionals maintain a positive outlook on the US market, despite the shift towards international diversification [4] Group 4: Market Performance and Investor Sentiment - Despite recent declines in tech stocks, the US market reached new highs, with the Dow Jones Industrial Average surpassing 50,000 points [5] - Investors have been rotating out of leading domestic stocks, seeking the next wave of growth opportunities in foreign markets [5] - There is a growing interest among clients in holding more foreign company stocks, indicating a shift in investor sentiment towards international diversification [5]

Core Insights - The strength of international equities ETFs is a significant market story for 2025, driven by investor interest in diversifying away from U.S. stocks and A.I.-driven concentration risks [1][2] - The performance of international equities ETFs in 2026 remains uncertain, but factors such as a weakening dollar and favorable foreign market conditions may support continued investor interest [3][4] Group 1: Market Dynamics - Investors are increasingly seeking foreign diversification to mitigate risks associated with the U.S. stock market, including a shifting yield curve and a declining dollar [2][3] - Many foreign markets have been more effective in managing inflation and are ahead of the U.S. in cutting cycles, making them attractive to U.S. investors [4] Group 2: Investment Strategies - The international equities space is diverse, with varying outcomes across different markets, suggesting that some markets may underperform while individual firms may thrive [5] - Active international equities ETFs, such as the T. Rowe Price International Equity ETF (TOUS), leverage fundamental research to identify investment opportunities, potentially outperforming passive ETFs in 2026 [6]

Core Insights - There is a significant shift of investor interest towards international equity ETFs, with $22 billion in net flows recorded in October, bringing total inflows for 2025 to over $150 billion and net assets to $2,014 billion [1][2]. Group 1: Market Trends - International equity ETFs now represent 14% of the total ETF marketplace as of October 31 [1]. - Despite market uncertainties such as tariffs and geopolitical tensions, investors are still attracted to international equities this year [2]. - The U.S. Federal Reserve's rate-cutting cycle is contributing to the movement towards international equities as the dollar depreciates [3]. Group 2: Performance Metrics - The MSCI ACWI Ex USA index, which tracks stocks in major developed and emerging markets excluding the U.S., has been outperforming the S&P 500 for most of the year [4]. Group 3: Investment Options - Thornburg offers two active international equity ETFs: Thornburg International Equity ETF (TXUE) for broad exposure and Thornburg International Growth Fund ETF (TXUG) for growth-focused investments [5][6]. - These actively managed ETFs leverage the expertise of the Thornburg investment management team to navigate the complexities of international markets [6].