It's Not Too Late to Join the International Equity Party

International equities have significantly outperformed U.S. markets year-to-date, with the MSCI EAFE Index gaining 19.1% and specific funds like the WisdomTree International High Dividend Fund (DTH) up 23.18%. This strong performance, combined with international stocks' current under-ownership and more favorable valuations relative to U.S. counterparts, suggests a potential sustained shift in market leadership. DTH, notable for its 8.21% distribution yield and value-oriented sector exposure, is highlighted as a compelling vehicle for investors seeking to capitalize on this potential new era of ex-U.S. equity outperformance.

Analysis

International equities have demonstrated significant strength in 2025, with the MSCI EAFE Index posting a 19.1% year-to-date gain, substantially outpacing the S&P 500. This trend suggests a potential new era of ex-U.S. market leadership, supported by more attractive relative valuations compared to loftier U.S. stock levels, as noted by Morningstar. Further reinforcing this outlook is the current investor positioning, with international funds representing only 26% of total U.S. fund assets, well below a market-cap-weighted allocation of 37.7%, indicating significant room for capital inflows. The WisdomTree International High Dividend Fund (DTH) is highlighted as a specific vehicle capitalizing on this shift, having returned 23.18% YTD, outperforming its benchmark by approximately 400 basis points. DTH's strategy is noteworthy for combining a high distribution yield of 8.21% with a value-oriented portfolio—over 42% allocated to financials and industrials—while maintaining relatively low exposure to traditionally defensive sectors like utilities.

Key Decisions for Investors

• Investors should review their geographic allocation and consider increasing exposure to ex-U.S. equities to capitalize on the current performance momentum and favorable relative valuation outlook.
• For targeted exposure, strategies focusing on international high-dividend and value stocks, such as the one exemplified by DTH, warrant consideration due to their demonstrated outperformance and significant income generation.
• It is prudent to monitor the valuation gap between U.S. and non-U.S. markets, as a significant narrowing could signal a maturing of the outperformance trend.
• Given the data on investor under-allocation, tracking fund flows into international equities could serve as a key confirming indicator for the sustainability of this market rotation.