Faith & Finance

For the past decade, U.S. stocks have stolen the spotlight. Fueled by the dominance of tech giants and ultra-low interest rates, American equities have outperformed much of the world—leaving many investors to wonder if there’s any need to look beyond U.S. borders. But history—and current market conditions—suggest it may be time to take a fresh look at foreign stocks.

A recent article from Sound Mind Investing by Mark Biller outlines why international markets could be poised for a resurgence. From valuation gaps and shifting fiscal policy to global capital flows and post-COVID economic trends, several factors are aligning that could make foreign equities an important part of a well-diversified portfolio again.

Let’s walk through the key highlights and insights from the article—and why this may be a wise moment to think globally in your investment strategy.

Mark Biller is Executive Editor and Senior Portfolio Manager at Sound Mind Investing, an underwriter of Faith & Finance.

Why Should U.S. Investors Consider Foreign Stocks?

1. Diversification and Market Dynamics

Foreign stocks offer investors the opportunity to diversify—not just by geography but also by market behavior. While U.S. stocks declined by more than 4% in Q1 of this year, a common international fund used by Sound Mind Investing rose by over 8%. That kind of divergence underscores the value of spreading risk across global markets.

Two decades ago, having 20% or more of your equity portfolio in international stocks was standard practice. However, as U.S. markets have surged over the last 14 years—outperforming foreign stocks by a factor of four—many investors have pulled back. History, however, suggests the pendulum could be swinging back.

2. The Tech Bubble Parallel

Remember the late 1990s tech boom? From 1995 to 1999, the S&P 500 rose more than 20% annually, driven largely by internet stocks. Sound familiar?

After the dot-com bubble burst in March 2000, U.S. stocks stalled—gaining just 13% over the next 7.5 years. Meanwhile, foreign stocks soared, climbing 69% during that same stretch. Market cycles like this remind us that chasing performance can lead to missed opportunities elsewhere.

3. A Price-to-Earnings Disparity

Currently, U.S. stocks trade at a P/E ratio of around 26—well above historical norms. Foreign stocks? Around 16. That’s a significant valuation gap. While valuation alone doesn’t indicate when markets will shift, it does suggest that the upside potential for international equities is greater—especially if investor sentiment begins to shift.

4. Post-COVID Spending and Sector Shifts

COVID-19 marked the end of a 40-year trend of declining inflation and interest rates. Since then, we’ve entered a new environment with higher inflation and rising rates—conditions that benefit the more industrial, less tech-heavy composition of many foreign markets.

U.S. tech stocks, dominant in low-rate environments, may not fare as well moving forward. Foreign markets, which lean toward traditional sectors, could outperform in this new economic climate.

5. Shifting Fiscal Policy

One potential catalyst for foreign stock performance is shifting government policies. The U.S. has begun cutting back on spending, while other countries—facing rising defense needs and new trade dynamics—are ramping up.

Historically, higher government spending boosts economic growth in the short term. If the U.S. tightens its belt while others open their wallets, we may see a reversal in relative market performance.

6. The "Sequencing Risk" of Tariff Policies

“Sequencing risk” is a dynamic in which the pain of policy changes is felt up front, while the benefits come later. For example, tariffs initially slow economic activity but are implemented in hopes of long-term economic independence and stability.

This could reduce U.S. growth projections in the short term as some foreign economies accelerate. This divergence can significantly influence investment returns.

7. Follow the Money

For decades, the global economy has operated under a system where the U.S. buys, and the rest of the world recycles its earnings back into U.S. assets. This has been a tailwind for U.S. stocks and bonds.

But what happens if the U.S. begins importing less? Those recycled dollars may dry up—meaning less foreign investment in U.S. markets and potentially more reinvestment at home, in countries where those goods are produced. That shift could fuel a rally in international markets.

8. It’s Not Either/Or—It’s Both/And

This isn’t about abandoning U.S. stocks. It’s about recapturing the value of a globally diversified portfolio. With international stocks looking attractively priced and a number of tailwinds forming, now may be a wise time to add foreign exposure through mutual funds or ETFs.

The impact could be substantial if global capital starts flowing back into foreign stocks.

If your portfolio has drifted into a U.S.-only approach over the last decade, now may be the time to revisit your strategy. While no one can predict the future, wise stewardship includes preparing for it with thoughtful diversification.

For a deeper dive into this topic, you can read Mark Biller’s full article, “Time for Foreign Stocks to Shine?” at SoundMindInvesting.org.

On Today’s Program, Rob Answers Listener Questions:

• I want to buy an expensive watch. Is this being a bad steward of God's money? Where's the line between treating myself and overspending?
• I own a condo unit in a homeowners' association that has been assessed $870,000 for a roof replacement. The association claims the original contractor was paid $438,000 and ran away with the money. Are there any government agencies that can investigate this, and what rights do I have?

Resources Mentioned:

• Faithful Steward: FaithFi’s New Quarterly Magazine
• Sound Mind Investing | Time for Foreign Stocks to Shine? By Mark Biller
• Wisdom Over Wealth: 12 Lessons from Ecclesiastes on Money (Pre-Order)
• Look At The Sparrows: A 21-Day Devotional on Financial Fear and Anxiety
• Rich Toward God: A Study on the Parable of the Rich Fool
• Find a Certified Kingdom Advisor (CKA) or Certified Christian Financial Counselor (CertCFC)
• FaithFi App

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