33 stocks to bet on foreign markets continuing to beat the S&P 500

By Mark Hulbert

Surprisingly, many foreign markets are way ahead of the U.S. in year-to-date performance

The global stock market's year-to-date returns provide yet another lesson in how unpredictable investing can be.

Global fuel shortages were supposed to be especially bad news for non-U.S. markets, since the U.S. is a net energy exporter and therefore better able to withstand disruptions such as the closing of the Strait of Hormuz.

But try telling that to non-U.S. markets, many of which have beaten the S&P 500 SPX in year-to-date performance - as you can see from the below chart.

To be sure, some countries' markets have been hit hard, especially in Asia. But, overall, non-U.S. markets are ahead. The iShares Asia 50 ETF AIA, comprised of the 50 Asian companies with the largest market capitalizations, has produced a year-to-date return of 41.2% - more than triple the S&P 500's comparable return of 13.7%. The iShares MSCI All-Country Asia ex-Japan ETF AAXJ has produced a 23.0% return. And even Japan, whose currency (USDJPY) had to be rescued this past week, is beating the U.S.

Particularly noteworthy is the strong year-to-date performance of emerging-market value stocks - 30.1%, more than double the S&P 500's. These are out-of-favor stocks from countries that are least able to withstand energy disruptions.

Furthermore, the impressive performance of many non-U.S. stock markets came despite a stronger dollar, which creates headwinds for dollar-denominated investors in those markets. Despite widespread predictions at the beginning of the year that the dollar would significantly decline in value against foreign currencies, the U.S. Dollar Index DXY is slightly ahead in year-to-date performance.

There are two major investment lessons to learn from the unexpectedly strong year-to-date performance of many non-U.S. stock markets. The first is that valuations matter. The U.S. stock market at the beginning of this year had the highest cyclically adjusted price-to-earnings ratio (CAPE) among a group of more than two dozen developed countries, according to Barclays data - 70% higher, in fact, than the average CAPE of those other countries.

The second lesson is the virtue of diversification. Since the markets are so unpredictable, it makes sense to divide your eggs among many baskets rather than bet on just one. This would be good advice even if the U.S. market weren't so much more overvalued than non-U.S. markets. But given the overvaluation, diversification is even more important than ever.

Perhaps the simplest way to gain exposure to non-U.S. stocks is by investing in an ETF benchmarked to a non-U.S. stock-market index. One with a low expense ratio is the Vanguard Total International Stock ETF VXUS, which charges just 0.05% per year. If you want to try your hand at picking individual non-U.S. stocks, consider the table below, which contains all non-U.S. stocks recommended by at least one of the investment newsletters monitored by my performance-auditing firm.

 
Ticker                   Stock                               Country of headquarters 
ACN                      Accenture                           Ireland 
GOLF                     Acushnet Holdings                   South Korea 
AER                      AerCap Holdings                     Ireland 
ALIZY                    Allianz                             Germany 
DOX                      Amdocs                              Guernsey 
APTV                     Aptiv                               Switzerland 
ACGL                     Arch Capital Group                  Bermuda 
AXAHY                    AXA                                 France 
BNS                      Bank of Nova Scotia                 Canada 
BIRK                     Birkenstock Holding                 Luxembourg 
BP                       BP                                  United Kingdom 
BN                       Brookfield                          Canada 
CMPR                     Cimpress                            Ireland 
DMC                      Del Monte                           Cayman Islands 
ETN                      Eaton                               Ireland 
HMC                      Honda Motor                         Japan 
ITRN                     Ituran Location & Control           Israel 
PHG                      Koninklijke Philips                 Netherlands 
KLIC                     Kulicke & Soffa Industries          Singapore 
LOGI                     Logitech International              Switzerland 
MDT                      Medtronic                           Ireland 
NVO                      Novo Nordisk                        Denmark 
NTR                      Nutrien                             Canada 
NXPI                     NXP Semiconductors                  Netherlands 
ONON                     On Holding                          Switzerland 
STX                      Seagate Technology Holdings         Singapore 
SIEGY                    Siemens                             Germany 
SW                       Smurfit Westrock                    Ireland 
TSM                      Taiwan Semiconductor Manufacturing  Taiwan 
TU                       Telus                               Canada 
TTE                      TotalEnergies                       France 
TW                       Tradeweb Markets                    United Kingdom 
VWAGY                    Volkswagen                          Germany 
                                                               Source: Hulbert Ratings 

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at mark@hulbertratings.com.

-Mark Hulbert

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08-06-26 0730ET