Vanguard suggests international stocks, specifically through the VXUS ETF, offer better long-term value and growth potential than the S&P 500 as AI adoption spreads globally.
VXUS offers exposure to 8,772 international stocks, providing a valuation advantage with a P/E ratio of 18.44, representing a 22% discount to the S&P 500. Vanguard research indicates that international firms may capture significant AI productivity gains, potentially leading to superior long-term performance compared to U.S. indices.
The Vanguard Total International Stock ETF holds 8,772 stocks from dozens of countries outside the U.S.
The S&P 500 is currently viewed as expensive and top-heavy due to a high concentration of tech majors and AI-related stocks. Vanguard's research suggests that U.S. market returns may lag behind international equities over the next 30 years, with the S&P 500 expected to return 4.7% to 6.7% annually compared to higher global projections.
Vanguard's Capital Markets Model expects annualized returns of 4.7% to 6.7%.
Vanguard research projects international equities will deliver annualized returns of 5.9% to 7.9% over the next three decades, outpacing the S&P 500's expected 4.7% to 6.7%. Analysts suggest that while U.S. markets remain top-heavy with expensive AI-focused tech majors, international firms are better positioned to capture long-term productivity gains from AI implementation.
Vanguard research indicates that U.S. markets are currently expensive and concentrated in tech majors, while international markets offer more attractive valuations and broader exposure to global AI implementation.