How Much Cheaper Are International Stocks Than U.S. Stocks?

Right now, planetary stocks are a immense bargain compared to U.S. stocks. Apollo Global Management estimates that the price-to-earnings (P/E) ratio, which measures a stock's terms comparative to the company's earnings, of U.S. stocks is 40% higher than the P/E ratio for the remainder of the world. So U.S. stocks are 40% much costly than planetary stocks.

The 2 groups of equities were priced astir the aforesaid up until astir 2015, but the surge successful valuations of U.S. tech stocks (think Magnificent Seven stocks) has sent U.S. valuations overmuch higher successful caller years. Right now, the mean guardant P/E ratio for U.S. stocks is astir 28, portion that ratio lingers nearer to 19 for non-U.S. planetary stocks.

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Guess what: International stocks person been outperforming U.S. stocks successful caller months, successful a large way. In 2025, non-U.S. developed marketplace stocks, arsenic measured by the Vanguard FTSE Developed Markets ETF (NYSEMKT: VEA), returned 35.2%. Emerging marketplace stocks, arsenic measured by the Vanguard Emerging Markets Stock Index Fund ETF (NYSEMKT: VWO), returned 25.6%.

Both crushed the U.S. banal market, which roseate 17.7%, arsenic measured by the S&P 500 index. That scale is simply a bully proxy for the full U.S. banal market, arsenic it represents astir 80% of full U.S. marketplace value.

So acold successful 2026, that inclination has continued. VEA, which excludes U.S. equities, is up 8.7% twelvemonth to date. VWO is up 7%, portion the S&P 500 scale is fundamentally level for the year. Will that divergence betwixt U.S. markets and planetary markets proceed done 2026?

I judge it will, for a mates of important reasons. European stocks look similar they person further upside imaginable this twelvemonth owed to beardown planetary economical maturation and rising fiscal and defence spending successful Europe, according to Goldman Sachs.

Prospects for stocks successful emerging markets (EM) and processing economies besides look bully owed to rising net successful galore EM countries, peculiarly China and South Korea. Equities successful India and Brazil besides look promising successful the adjacent term. Goldman Sachs sees EM stocks returning 16% this year.

To beryllium sure, U.S. stocks could rebound, particularly since it looks progressively apt that the Federal Reserve volition easiness involvement rates much than expected this twelvemonth owed to falling inflation. But adjacent if U.S. equities emergence to rival the show of planetary stocks successful 2026, they're inactive a batch much expensive. So savvy investors volition decidedly privation to see an concern successful planetary stocks -- some precocious system and emerging marketplace stocks -- close now.