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Market Update

Why the Best Values Are Still Abroad

A long-term slump for international stocks means lower price tags.

Stocks outside the United States have shown some signs of strength lately. In the fourth quarter of 2020, for example, the Morningstar Global Markets ex-US Index gained 17.4% compared with a 14.2% return for the Morningstar US Market Index. That quarter was a rare glimmer of hope amid an unusually long performance slump. Over the past 10 years, annualized returns from international stocks have lagged those of their domestic counterparts by more than 7 percentage points per year, on average.

The bright side of this long and painful performance slump: While few markets qualify as cheap, non-U.S. markets offer more attractive valuations in relative terms.