There Has Been a Disturbance in the Force…

Key Takeaways

• Foreign value stocks rallied 30‑50% in 2025, adding 15‑20% YTD
• Advisor sentiment shifting from avoidance to cautious re‑entry in ex‑US equities
• Majority of portfolios remain below the 30% ex‑US benchmark
• Zero exposure persists among many advisors despite strong performance
• Rebalancing could unlock diversification benefits and improve risk‑adjusted returns

Pulse Analysis

The past two years have been a renaissance for foreign and emerging‑market value equities. Driven by a combination of lower commodity prices, easing monetary tightening abroad, and a re‑rating of undervalued companies, these markets delivered 30%‑50% gains in 2025 and are on track for another 15%‑20% this year. Such performance narrows the historical gap with U.S. equities and re‑establishes foreign value as a viable source of alpha, especially as global earnings growth outpaces domestic trends.

Despite the data, many financial advisors remain cautious. For over a decade, the narrative warned clients to avoid foreign stocks after prolonged underperformance, cementing a zero‑to‑low allocation habit. Even as the narrative softens, the average advisor’s portfolio still falls short of the 30% ex‑US weight recommended by most strategic asset‑allocation models. Behavioral inertia, client familiarity bias, and concerns about currency volatility contribute to this lag, leaving a sizable portion of portfolios underexposed to the upside in foreign value.

The implication for investors is clear: rebalancing toward foreign and emerging‑market value could enhance diversification and improve risk‑adjusted returns. By allocating even modestly—5% to 10%—to these segments, investors can capture the upside while mitigating concentration risk in domestic equities. As advisors gradually adjust their stance, proactive investors who act ahead of the curve may benefit from superior total‑return potential and a more resilient portfolio architecture.