Vanguard’s Ultra-Low-Cost VXUS ETF Beats the S&P 500 in 2026 as International Stocks Regain Momentum
Vanguard’s Ultra-Low-Cost VXUS ETF Beats the S&P 500 in 2026 as International Stocks Regain Momentum
Vanguard’s Total International Stock ETF, known by its ticker VXUS, has delivered a notable surprise in 2026: it has outpaced the S&P 500 so far this year. According to 24/7 Wall St., VXUS was up about 10% year to date, while Vanguard’s S&P 500 ETF, VOO, had gained roughly 8% over the same period.
This is important because U.S. stocks have dominated global markets for much of the past decade. Many investors who held international funds watched American technology giants, growth stocks, and S&P 500 index funds pull far ahead. For years, international diversification looked useful in theory but disappointing in practice.
Why VXUS Is Getting Attention Again
VXUS gives investors broad exposure to companies outside the United States. The fund tracks the FTSE Global All Cap ex US Index and holds more than 8,000 stocks across developed and emerging markets. It also charges a very low annual expense ratio of 0.05%, making it one of the cheaper ways to invest internationally.
The fund includes companies from regions such as Europe, Japan, Canada, Australia, and emerging markets. This makes VXUS a simple option for investors who do not want to choose individual foreign stocks or guess which country will perform best next.
International Stocks Are Benefiting From a Shift in Market Conditions
The recent strength in VXUS comes from several factors. First, non-U.S. earnings have improved in parts of the world. Second, developed markets such as Japan and Europe have shown stronger momentum. Vanguard’s FTSE Developed Markets ETF, VEA, was up nearly 11% year to date, while Vanguard’s Emerging Markets ETF, VWO, had gained about 8%.
Japan has benefited from corporate reforms, while European industrial companies have seen renewed investor interest. These trends have helped developed international markets carry much of the recent performance.
The Long-Term Picture Still Favors U.S. Stocks
Even though VXUS is ahead in 2026, the long-term comparison still favors the S&P 500. Over five years, VXUS returned about 51.3%, compared with roughly 85.4% for the S&P 500 proxy. Over ten years, VXUS returned about 145%, while VOO gained about 313.8%.
That gap shows how powerful U.S. stocks have been, especially large technology companies. American firms in artificial intelligence, cloud computing, semiconductors, software, and digital advertising have driven much of the S&P 500’s gains.
What Investors Should Understand About VXUS
VXUS is not designed to beat the S&P 500 every year. Its main job is to provide broad international diversification. That means investors get exposure to thousands of companies outside the U.S., including banks, manufacturers, energy firms, healthcare companies, and consumer brands.
This can reduce the risk of being too dependent on one country’s stock market. However, it also means investors may miss some of the strong growth that comes from the U.S. technology sector.
Currency Movements Can Affect Returns
Currency is another major factor. When U.S. investors buy international stocks, foreign earnings must be converted back into dollars. If the dollar weakens, international returns can look stronger. If the dollar strengthens, it can reduce foreign-stock gains.
This currency effect can help or hurt VXUS, even when the underlying companies are performing well. That is why international ETFs can sometimes move differently from U.S. funds.
Who Might Consider VXUS?
VXUS may appeal to long-term investors who already own mostly U.S. stocks and want a more globally balanced portfolio. Some investors use international funds for 20% to 30% of their equity allocation, although the right amount depends on personal goals, risk tolerance, and time horizon.
The fund may also suit investors who want a simple, low-cost way to own both developed and emerging markets without making country-by-country decisions.
Risks Investors Should Not Ignore
Despite its recent strength, VXUS has risks. International markets may grow more slowly than the U.S. market. Foreign dividend taxes can reduce returns. Political risks, currency swings, and weaker technology exposure may also affect performance.
In addition, one strong year does not prove that international stocks will lead for the next decade. Investors should view the recent outperformance as a reminder of diversification, not as a guaranteed trend.
The Bottom Line
VXUS has finally shown meaningful year-to-date strength against the S&P 500, giving international investors a reason to pay attention. Its low cost, broad holdings, and global reach make it a useful diversification tool.
However, the S&P 500 still has a much stronger long-term record. For many investors, the choice may not be VXUS versus VOO, but how to combine both. U.S. stocks can provide growth, while international stocks can add balance and exposure to opportunities outside America.
This article is for informational purposes only and should not be considered financial advice.
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