Video Transcript

Hello, everyone. My name is Nolan Mauk, and I'm an investment research analyst here at Orion. I wanted to jump on today and discuss international equities, an asset class that has been relatively out of favor compared to the United States for over a decade, but it started to stand out in the first quarter of 2025 amid U.S. volatility.

As of this recording, international equities are outperforming the S&P 500 by over 10% year to date, causing many investors to take another look at their strategic international equity allocations.

Let's take a quick look at some potential benefits of holding international equities within diversified long-term portfolios.

Presentation showing risk reduction through international equity diversification

 

First, holding international stocks can do more than just provide a differentiated source of returns in market conditions like these. It also has the potential to dampen volatility over the long term. This study done by Vanguard found that allocating between 20% and 50% of the equity portion of portfolios to international stocks can provide meaningful volatility reduction benefits over time, historically speaking.

Additionally, the current deglobalization trends we're seeing, including market-friendly policy changes in important international markets that may improve growth prospects going forward, could further decrease correlations between economies and markets, which may further increase the diversification benefits of an allocation to international equities.

Slide showing historical international stock values

 

Now despite the recent rally in ex-U.S. markets, the valuation landscape remains attractive for foreign stocks if history is any guide, as international stocks have traded at their largest discount to U.S. stocks of the 21st century in recent months.

With the backdrop of a volatile U.S. market year to date, the valuation disparity between the U.S. and ex-U.S. markets, along with catalysts like European economic stimulus and strong GDP growth in Asia, there is a potential opportunity to strategically diversify with international equities.

Thanks for checking in. And as always, if you have any questions, please let us know. Thanks.

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Orion Portfolio Solutions, LLC, an Orion Company, is a registered investment advisor.

All charts and graphs are presented for informational and analytical purposes only. No chart or graph is intended to be used as a guide to investing. Information contained herein is derived from sources we believe to be reliable, however, we do not represent that this information is complete or accurate and it should not be relied upon as such. The views expressed herein are exclusively those of Orion Portfolio Solutions, LLC and are not meant as investment advice and are subject to change. This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Diversification and asset allocation do not ensure a profit or guarantee against loss. Past performance is not a guide to future performance. Investing in any security involves certain systematic risks including, but not limited to, market risk, interest-rate risk, inflation risk, and event risk. These risks are in addition to any unsystematic risks associated with particular investment styles or strategies.   
 
The S&P 500 Index is an unmanaged composite of 500-large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks.

The MSCI ACWI ex USA Index captures large and mid cap representation across 22 of 23 Developed Markets (DM) countries - excluding the United States. With 816 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.

The MSCI USA Index is a free float adjusted market capitalization index that is designed to measure large and mid cap US equity market performance. The MSCI USA Index is member of the MSCI Global Equity Indices and represents the US equity portion of the global benchmark MSCI ACWI Index.

The CRSP U.S. Total Market Index is a free float adjusted market capitalization index that is designed to represent 100% of the US investible equity market.

An index is an unmanaged group of stocks considered to be representative of different segments of the stock market in general. You cannot invest directly in an index.