The S&P 500 Is Currently Priced High; This ETF May Provide a Hedge Against a Possible Market Downturn.
Current Market Valuation
- S&P 500 Shiller P/E Ratio: The Shiller price-to-earnings ratio for the S&P 500 has reached nearly 39, the highest level since October 2000, indicating a potentially overvalued market reminiscent of the dot-com bubble.
- Impact of AI on Market: The recent rise in the S&P 500 has been largely driven by optimism surrounding artificial intelligence, particularly from the tech sector's "Magnificent Seven" stocks.
Investment Strategies
- Hedging Against U.S. Market Decline: Given the high valuation of U.S. stocks, investors are advised to consider international stocks as a hedge against potential downturns in the S&P 500.
- Vanguard Total International Stock ETF: This ETF offers exposure to 8,615 stocks from both developed and emerging markets, providing diversification and reducing risk associated with any single economy.
Performance Insights
- ETF Performance: The Vanguard Total International Stock ETF has outperformed the S&P 500 year-to-date, with a 22% increase compared to the S&P 500's gains, which have been more modest.
- Dividend Yield: The ETF offers a dividend yield of 2.7%, which can provide a buffer during market downturns, making it an attractive option for investors seeking income.
Long-Term Considerations
- Historical Performance: While the Vanguard Total International Stock ETF has typically underperformed the S&P 500 over the long term, it tends to hold steady during bear markets, making it a valuable addition for risk-averse investors.
- Investment Recommendations: The Motley Fool's Stock Advisor has identified ten stocks that are currently recommended for investment, which have historically provided significant returns, contrasting with the Vanguard ETF's performance.
Conclusion
- Cautious Approach Recommended: Investors are encouraged to exercise caution given the current high valuations in the U.S. market and consider diversifying their portfolios with international investments to mitigate risks associated with potential market corrections.
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Analyst Views on VXUS
About the author
Gold and Silver Investments Soared While Cryptocurrency Plummeted.
- Overall Performance: 2025 was a strong year for both stock and bond funds, despite facing some challenges throughout the year.
- Final Quarter Success: The last quarter of 2025 continued the positive trend, contributing to the solid performance of these funds.
International Deals to Watch in 2026: Alibaba, Kering, and 5 Others
International Stock Performance: In 2025, international stocks, particularly in export-driven countries like Korea and China, experienced strong gains, surpassing the performance of the S&P 500 despite high U.S. tariffs.
Future Market Outlook: There is potential for further rallies in non-U.S. markets in 2026, driven by decreasing interest rates and increasing corporate earnings.
VXUS vs. VT: Key Distinctions in Global Investment Exposure
Comparison of VXUS and VT: VXUS offers a higher dividend yield and lower expense ratio than VT, which includes U.S. stocks, while VXUS focuses solely on international equities, leading to different sector exposures and performance profiles.
Investment Focus: VT provides broad global exposure, including 63% in U.S. stocks, making it suitable for investors seeking both international and U.S. equity exposure, whereas VXUS targets only non-U.S. markets, appealing to those already heavily invested in U.S. equities.
Performance and Risk: While both funds are passively managed and highly liquid, VT has shown higher five-year growth and shallower drawdowns, whereas VXUS has performed better over the past year but carries greater recent volatility.
Investor Considerations: Investors should evaluate their specific goals, as the choice between VXUS and VT should consider factors beyond performance and yield, including portfolio composition and desired market exposure.
'Unexciting' ETF Sees Major Gains as Investors Allocate Billions Amid Uncertain Fed Forecast
ETFs Absorb Significant Inflows: U.S.-listed ETFs saw inflows of $44.2 billion last week, bringing year-to-date totals to $1.28 trillion, with equity funds leading the charge as the S&P 500 approached its October record.
SGOV's Notable Inflow: The iShares 0-3 Month Treasury Bond ETF (SGOV) attracted $2.7 billion, highlighting a cautious investor sentiment amidst broader market optimism, as it offers low interest-rate risk and high liquidity.
Investor Sentiment: While equity ETFs experienced substantial inflows, SGOV's performance indicates that investors are balancing bullishness with caution, seeking yield with minimal risk in a volatile environment.
Market Dynamics: The inflow into SGOV contrasts with outflows from longer-duration bonds, suggesting that investors are selectively positioning themselves rather than making a broad shift towards safety.
Significant ETF Inflows: VXUS, PDD, VWO, BEKE
52-Week Range of VXUS: VXUS has a 52-week low of $54.98 and a high of $75.885, with the last trade recorded at $75.22.
Understanding ETFs: Exchange traded funds (ETFs) function like stocks, where investors buy and sell "units" that can be created or destroyed based on demand.
Monitoring ETF Flows: Weekly monitoring of shares outstanding helps identify ETFs with significant inflows (new units created) or outflows (units destroyed), impacting the underlying holdings.
Disclaimer: The views expressed in the article are those of the author and do not necessarily represent Nasdaq, Inc.
Reasons for Shifting My Investments Away from U.S. Stocks, Following Warren Buffett's Example
Investment Strategy Shift: The author has reduced their investment in U.S. stocks in favor of international markets, despite the S&P 500's 17% increase in 2025.
Performance of Non-U.S. Markets: Data indicates that investing in non-U.S. markets has yielded significantly higher returns compared to U.S. stocks this year.
Gold and Silver Investments Soared While Cryptocurrency Plummeted.
- Overall Performance: 2025 was a strong year for both stock and bond funds, despite facing some challenges throughout the year.
- Final Quarter Success: The last quarter of 2025 continued the positive trend, contributing to the solid performance of these funds.
International Deals to Watch in 2026: Alibaba, Kering, and 5 Others
International Stock Performance: In 2025, international stocks, particularly in export-driven countries like Korea and China, experienced strong gains, surpassing the performance of the S&P 500 despite high U.S. tariffs.
Future Market Outlook: There is potential for further rallies in non-U.S. markets in 2026, driven by decreasing interest rates and increasing corporate earnings.
VXUS vs. VT: Key Distinctions in Global Investment Exposure
Comparison of VXUS and VT: VXUS offers a higher dividend yield and lower expense ratio than VT, which includes U.S. stocks, while VXUS focuses solely on international equities, leading to different sector exposures and performance profiles.
Investment Focus: VT provides broad global exposure, including 63% in U.S. stocks, making it suitable for investors seeking both international and U.S. equity exposure, whereas VXUS targets only non-U.S. markets, appealing to those already heavily invested in U.S. equities.
Performance and Risk: While both funds are passively managed and highly liquid, VT has shown higher five-year growth and shallower drawdowns, whereas VXUS has performed better over the past year but carries greater recent volatility.
Investor Considerations: Investors should evaluate their specific goals, as the choice between VXUS and VT should consider factors beyond performance and yield, including portfolio composition and desired market exposure.
'Unexciting' ETF Sees Major Gains as Investors Allocate Billions Amid Uncertain Fed Forecast
ETFs Absorb Significant Inflows: U.S.-listed ETFs saw inflows of $44.2 billion last week, bringing year-to-date totals to $1.28 trillion, with equity funds leading the charge as the S&P 500 approached its October record.
SGOV's Notable Inflow: The iShares 0-3 Month Treasury Bond ETF (SGOV) attracted $2.7 billion, highlighting a cautious investor sentiment amidst broader market optimism, as it offers low interest-rate risk and high liquidity.
Investor Sentiment: While equity ETFs experienced substantial inflows, SGOV's performance indicates that investors are balancing bullishness with caution, seeking yield with minimal risk in a volatile environment.
Market Dynamics: The inflow into SGOV contrasts with outflows from longer-duration bonds, suggesting that investors are selectively positioning themselves rather than making a broad shift towards safety.
Significant ETF Inflows: VXUS, PDD, VWO, BEKE
52-Week Range of VXUS: VXUS has a 52-week low of $54.98 and a high of $75.885, with the last trade recorded at $75.22.
Understanding ETFs: Exchange traded funds (ETFs) function like stocks, where investors buy and sell "units" that can be created or destroyed based on demand.
Monitoring ETF Flows: Weekly monitoring of shares outstanding helps identify ETFs with significant inflows (new units created) or outflows (units destroyed), impacting the underlying holdings.
Disclaimer: The views expressed in the article are those of the author and do not necessarily represent Nasdaq, Inc.
Reasons for Shifting My Investments Away from U.S. Stocks, Following Warren Buffett's Example
Investment Strategy Shift: The author has reduced their investment in U.S. stocks in favor of international markets, despite the S&P 500's 17% increase in 2025.
Performance of Non-U.S. Markets: Data indicates that investing in non-U.S. markets has yielded significantly higher returns compared to U.S. stocks this year.
