International ETFs Soar—Here's Why They’re Beating the S&P 500
As the S&P 500 struggles, international ETFs are surging—driven by stimulus, trade dynamics and valuation shifts.
International ETFs are outperforming their U.S. counterparts this year, catching many investors off guard. While the S&P 500 flirts with correction territory—down nearly 10% from its recent highs—many global stock ETFs are heading in the opposite direction.
International ETFs Gain
Just last week, the iShares MSCI Germany ETF (EWG) hit a record high, boasting an almost 20% year-to-date gain. The Vanguard Total International Stock ETF (VXUS) has climbed 6%, a near mirror image of the SPDR S&P 500 ETF Trust (SPY), which has dropped 6% since the start of the year.
Even emerging markets, which typically falter in times of economic stress, are holding strong. The Vanguard FTSE Emerging Markets ETF (VWO) has posted a 2.7% gain this year.
Several factors are driving this trend.
1. Trade Disputes
One explanation is that international markets are better positioned to weather the ongoing trade disputes. While the U.S. is entangled in tariff battles on multiple fronts, many foreign economies primarily have to deal with a single adversary—the U.S. itself.
2. Government Stimulus
Government stimulus is also playing a role. Germany recently announced a €500 billion infrastructure package to jumpstart growth, while China has been ramping up fiscal support. In contrast, the U.S. has taken a different approach. Instead of increasing spending, the Department of Government Efficiency has prioritized budget cuts, reducing federal expenditures rather than expanding them.
3. Valuations
Valuations are another key factor. After more than a decade of outperformance by U.S. stocks, relative valuations between domestic and international markets have reached historic extremes. This year’s selloff could simply be a long-overdue recalibration.
Investors Are Taking Notice
U.S. investors have poured more than $19 billion into international stock ETFs since the start of the year, including $3.8 billion in the past week alone, according to etf.com fund flow data.
One of the biggest winners has been the Vanguard FTSE Europe ETF (VGK), which has attracted $2.2 billion in inflows this year and $1 billion in the past week alone.
VGK provides exposure to stocks across developed European markets, including companies from the U.K., Germany, France and Switzerland. With European equities benefiting from fiscal policy and defense-sector tailwinds, VGK has become a key allocation for investors looking to diversify away from U.S. stocks.
VXUS, which tracks the FTSE Global All Cap ex US Index, has also seen a surge in demand. The fund, which offers broad exposure to both developed and emerging markets outside the U.S., has picked up $1 billion in new investments over the past week and $2.7 billion since the start of the year.
With over 8,000 holdings, VXUS provides one of the most diversified international exposures available, spanning Europe, Asia and Latin America.
VGK and VXUS are both low-cost ETFs from Vanguard, with expense ratios of 0.06% and 0.05%, respectively, according to etf.com’s ETF Comparison tool. As a narrower ETF focused on Europe specifically, VGK holds 1,255 stocks compared to 8,459 for VXUS. 
Source: etf.com
Other Standout ETFs
Beyond VGK and VXUS, etf.com flows data show several other international ETFs have benefited from the shift in investor sentiment:
- iShares Currency Hedged MSCI EAFE ETF (HEFA): $1.9 billion in inflows year to date, offering exposure to developed international markets while hedging against currency fluctuations
- SPDR Portfolio Developed World ex-US ETF (SPDW): Another top choice, with $1.9 billion in inflows, providing low-cost access to developed markets outside the U.S.
- KraneShares CSI China Internet ETF (KWEB): $1.8 billion added this year as China ramps up economic stimulus, making KWEB a favored play on China’s tech sector
With valuations still low compared to the U.S., international stocks and their corresponding ETFs may continue to attract investor interest in the coming months.
Check out etf.com's International ETFs topics page for a full list of international exchange-traded funds.
