Country ETFs Looking For Record Years

International equities are demonstrating significant outperformance in 2025, with MSCI All World Ex. US ETFs recording over 24% year-to-date gains through Q3, nearly double the S&P 500's 12.7% return. Notably, Italy's EWI ETF has surged over 45%, positioning it for its largest annual gain on record, highlighting a strong divergence in global market performance.

Analysis

A significant performance divergence has emerged in global equity markets year-to-date in 2025, with international stocks substantially outperforming their U.S. counterparts. As of Q3, MSCI All World Ex. US ETFs have registered gains exceeding 24%, nearly doubling the 12.7% return of the S&P 500 (SPY). The Italian market is a notable outlier, with the iShares MSCI Italy ETF (EWI) surging over 45% YTD. This remarkable performance places the EWI on a trajectory for its largest annual gain since its 1996 inception, underscoring the exceptional strength and potential alpha generation within specific international markets compared to the broader U.S. index.

Key Decisions for Investors

• Investors with a heavy concentration in U.S. equities should consider re-evaluating their geographic allocation to increase exposure to international markets, given their significant year-to-date outperformance.
• The exceptional 45% gain in the Italian ETF (EWI) suggests a strong momentum trade, warranting consideration for a tactical overweight position while being mindful of potential for a near-term pullback.
• Monitor for persistence in this performance gap between U.S. (SPY) and ex-U.S. equities through year-end, as it may indicate a durable shift in market leadership requiring strategic portfolio adjustments.