The World Beyond Wall Street: Why International Stocks Are Poised for a Resurgence

You know, for what feels like an eternity, the investing world has pretty much revolved around the good ol' U.S. stock market. And honestly, who could blame us? U.S. equities have been on an absolute tear for years, often leaving their international counterparts in the dust. But here’s the thing about markets – they rarely move in a straight line forever, and what’s been true for a decade isn't necessarily a prophecy for the next. There’s a quiet rumble happening, a shift in the currents, and it suggests that international stocks, particularly those in developed markets, are finally ready to wake up and potentially shine.

Think about it like this: If you walked into a store and saw two very similar, high-quality items, but one was significantly cheaper than the other, which would catch your eye? That’s essentially the situation we’re in with global equities right now. U.S. stocks, frankly, look pretty pricey by historical standards and when stacked against their international peers. We're talking about valuations – like price-to-earnings ratios, or even more robust measures like the CAPE ratio – that show a rather dramatic discount on the international side. It’s almost as if the market has collectively decided to give international companies a 'for sale' sign, despite many of them being fantastic, world-leading businesses.

Beyond just the sticker price, there’s another huge factor at play: currencies. For a long time, the U.S. dollar has been incredibly strong. While that might feel good when you're traveling abroad, it actually acts as a bit of a headwind for U.S. investors holding international assets. When the dollar is strong, your foreign investments, once converted back to dollars, simply don't look as impressive. But here's the kicker: currency markets tend to revert to the mean over time. A dollar that's been historically strong is quite likely to weaken at some point, and when it does, that weakening provides a natural tailwind, boosting the returns of your international holdings without those companies even having to do anything different. It's like getting an extra boost just for being in the right place at the right time.

And let's not forget the global economic dance. The Federal Reserve, bless their hearts, has been quite aggressive with interest rate hikes to tame inflation. While other central banks around the world have also been tightening, the rate differential has often favored the dollar. However, as the Fed potentially nears the end of its tightening cycle, and other economies perhaps catch up, that gap could narrow. This rebalancing can make international markets more appealing to global capital flows. Plus, whispers of stimulus and reopening effects, especially in places like China, could ripple out, offering further catalysts for broader emerging and developed markets.

So, if you’re nodding along, thinking, "Okay, I get it, international makes sense," the next logical question is, "How do I actually invest in this opportunity?" Well, one excellent option that has really caught my attention is the Schwab International Dividend Equity ETF, or SCHY. Why SCHY, you ask? Because it's not just about broad international exposure; it’s about quality exposure.

SCHY focuses specifically on international developed markets – think Europe, Japan, Canada, Australia – but with a smart twist. It zeroes in on companies that have a strong history of paying dividends, but it doesn't stop there. Crucially, it screens for quality. We’re talking about companies with solid fundamentals, reasonable debt levels, and the kind of financial health that allows them to keep paying those dividends, even in trickier economic climates. It's a defensive posture wrapped in an offensive opportunity.

Moreover, SCHY boasts a very reasonable expense ratio, which is always a plus in my book – nobody wants their hard-earned returns eaten away by fees. It also offers a respectable yield, providing a nice income stream while you wait for that potential capital appreciation. It's diversified across many countries and sectors, so you're not putting all your eggs in one geographic or industry basket. It's really a thoughtful way to add that much-needed international developed market diversification to a portfolio that might currently be too heavily weighted towards the U.S.

Now, of course, no investment comes without its share of risks. Geopolitical tensions are always a factor, global growth can sometimes slow more than anticipated, and hey, the U.S. dollar could stubbornly remain strong longer than expected. These are all things to keep in mind. But when you weigh those against the compelling valuation argument, the potential for currency tailwinds, and the quality-focused approach of something like SCHY, it certainly makes a very persuasive case for looking beyond our borders right now. Sometimes, the best opportunities are found where everyone else isn't looking.