The S&P 500 (^GSPC 1.52%) is considered the best gauge for the overall U.S. stock market. It has advanced nearly 16% year to date. But stock markets outside the U.S., in both developed and emerging markets, have generally done better.
In 2025, the Vanguard FTSE Developed Markets ETF (VEA 1.96%) has advanced 31%, and the Vanguard FTSE Emerging Markets ETF (VWO 2.25%) has advanced 22%. One reason for their outperformance is that foreign currencies have strengthened compared to the U.S. dollar due to concerns about President Trump's trade and monetary policies.
Importantly, J.P. Morgan recently published its long-term market assumptions, and analysts expect the outperformance to continue. Specifically, they expect the S&P 500 to return 6.7% annually over the next 10 to 15 years, while equities in developed and emerging markets achieve annual returns of 7.5% and 7.8%, respectively.
Here's what investors should know.
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1. Vanguard FTSE Developed Markets ETF
The Vanguard FTSE Developed Markets ETF measures the performance of 3,800 companies located in developed markets outside the United States, especially Japan, the U.K., and Canada. The index fund is most heavily exposed to stocks in the financials, industrials, and consumer discretionary sectors.
Here are the top five positions, listed by weight:
- ASML Holding: 1.4%
- Samsung Electronics: 1.1%
- AstraZeneca: 0.9%
- Roche Holding: 0.9%
- Nestlé: 0.9%
The Vanguard FTSE Developed Markets ETF returned 132% over the last decade, while the S&P 500 achieved a total return of 297%. Yet J.P. Morgan analysts expect developed-market equities to outperform the U.S. stock market by 15 percentage points over the next decade due to a combination of more attractive valuations, the strengthening of foreign currencies (relative to the U.S. dollar), and higher dividends.
NYSEMKT: VEA
Key Data Points
Those arguments are certainly logical, but even the best analysts struggle to consistently predict the future with any degree of accuracy. In 2020, J.P. Morgan estimated the S&P 500 would return 5.7% annually over the long term, but that forecast now seems way off base. The S&P 500 has actually returned 15.1% annually since that prediction was published.
The Vanguard FTSE Developed Markets ETF has an expense ratio of 0.03%. That means shareholders will pay $3 per year on every $10,000 invested.
Investors who want exposure to stalwart stocks outside the United States should consider this Vanguard index fund. But I would keep my position rather small, and instead prioritize an S&P 500 index fund (and individual U.S. stocks).
2. Vanguard FTSE Emerging Markets ETF
The Vanguard FTSE Emerging Markets ETF measures the performance of 6,000 companies located in emerging markets, especially China, Taiwan, and India. The fund is most heavily invested in stocks in the technology, financials, and consumer discretionary sectors.
Here are the top five positions, listed by weight:
- Taiwan Semiconductor: 10.6%
- Tencent Holdings: 4.5%
- Alibaba Group: 3.4%
- HDFC Bank: 1.1%
- Reliance Industries: 1%
The Vanguard FTSE Emerging Markets ETF returned 119% during the last decade, while the S&P 500 achieved a total return of 297%. Nevertheless, J.P. Morgan analysts think emerging-market equities will outperform the U.S. stock market by 20 percentage points over the next due to cheaper valuations and the strengthening of foreign currencies (relative to the U.S. dollar).
NYSEMKT: VWO
Key Data Points
The Vanguard FTSE Emerging Markets ETF has a modest expense ratio of 0.07%, meaning shareholders will pay $7 per year on every $10,000 invested in the fund.
Investors looking for exposure to international stocks should consider a small position in this index fund, but I would keep a larger percentage of my portfolio in an S&P 500 index fund (and individual U.S. stocks) simply because it has historically been a mistake to bet against the U.S. stock market.
