Analysis of Seeking Alpha's Perspective on International Stocks' Unproven Strength

This analysis evaluates a Seeking Alpha article [1] claiming international stocks lack superior economic fundamentals, with recent outperformance driven by U.S. dollar weakness, and exhibit high correlation with U.S. stocks. Market data from December 1, 2025, to January 5, 2026, shows Vanguard Total International Stock ETF (VXUS) outperformed SPDR S&P 500 ETF (SPY) by 3.39% vs. 1.43% [0]. While the U.S. dollar’s 6.65% decline in 2025 (WSJ Dollar Index) [2] likely boosted international returns, a Wall Street Journal analysis identifies additional drivers: narrowing valuations and improved earnings growth in foreign markets [3]. Correlation analysis over the 9 most recent trading days (December 22, 2025–January 5, 2026) shows a strong positive correlation of ~0.68 between SPY and VXUS [0], below the 0.80 threshold typically associated with negating diversification benefits, partially countering the article’s “high correlation” claim. Valuation data from late 2025 reveals a significant discount: Eurozone ETF (EZU) had a trailing P/E of 17.68x, while S&P 500 ETF (VOO) traded at 28.86x [4].

1. Correlation Misalignment
   : The article’s “high correlation” assertion is not fully supported by the 0.68 coefficient, indicating diversification benefits between U.S. and international stocks may still be viable.
2. Multifaceted Outperformance Drivers
   : 2025–2026 international stock gains stem from both U.S. dollar weakness and fundamental improvements/valuation adjustments, not solely currency dynamics.
3. Valuation Discount Catalyst
   : The substantial P/E gap between international and U.S. stocks presents a potential long-term value opportunity, even amid short-term currency sensitivity.

• Currency Risk
  : International returns are vulnerable to U.S. dollar fluctuations; a strengthening dollar could reverse gains for U.S. investors.
• Geopolitical Risks
  : Regional conflicts, trade tensions, and policy changes unique to international markets may disrupt performance.
• Economic Divergence
  : If foreign fundamentals fail to improve, international stocks could lag despite valuation discounts.

• Valuation Advantage
  : The P/E discount may attract value-focused long-term investors.
• Diversification Potential
  : The <0.80 correlation suggests international stocks can still reduce portfolio risk.
• Earnings Growth
  : Improved foreign earnings could sustain outperformance independent of currency trends.

1. U.S. dollar trends (DXY/WSJ Dollar Index) for currency impact.
2. Quarterly earnings comparing U.S. and international company growth.
3. Geopolitical developments and global central bank actions.
4. 1–3 year correlation trends to validate diversification benefits.

This analysis balances the Seeking Alpha article’s claims with market data:

• Short-term VXUS outperformance over SPY from December 2025–January 2026.
• A 0.68 correlation coefficient that does not entirely negate diversification benefits.
• Multiple drivers of international gains beyond U.S. dollar weakness.
• A significant valuation discount relative to U.S. stocks, indicating potential long-term value.
  Decision-makers should consider these factors alongside currency and geopolitical risks when evaluating international equities.