International investing 2026: Why consider global stocks?

• Our preference is for emerging markets over developed economies. EM flows have been resilient, and we see the most exposure to the AI theme outside of the U.S. within EM, particularly through Asia and single-country exposures.
• South Korea stands out as a high conviction exposure, supported by strong earnings momentum, positive sentiment, and upward EPS revisions. Despite a significant market rally, valuations remain attractive, with companies in the Korea Composite Stock Price Index trading near historic-low valuations as earnings growth accelerates.

Investors looking to add international equities may consider:

Broad exposure: iShares Core MSCI Total International Stock ETF (IXUS)
Regional exposure: iShares Core MSCI Emerging Markets ETF (IEMG)
Single-country exposure: iShares MSCI South Korea ETF (EWY)

If 2025 was the year many investors “rediscovered” international stocks, 2026 has been the year to be more precise in global exposures.

Fund flows suggest market participants are seeking more tailored and targeted opportunities within the broad asset class of international equities this year, as discussed in our Spring 2026 Investment Directions.

Year-to-date in 2026, investors have added $35 billion to U.S.-listed broad emerging market equity ETFs, up 21% from last year.¹ Single-country ETFs have recorded exceptional demand, led by South Korea and Brazil within emerging markets, and Japan within developed markets. Notably, 2026 flows into single-country ETFs have already exceeded the total inflows for all of 2025.²

Our client conversations indicate robust demand for emerging market tech through broad Asia exposures and single-country funds such as South Korea and Taiwan. Demand remains particularly strong among non-U.S. investors, who continue to add back to home equity markets.

For U.S. investors, particularly those overweight domestic equities, looking abroad can offer the twin benefits of lower valuations and potentially increased diversification. A rangebound U.S. dollar further adds to the favorable backdrop.

Home country bias remains a persistent theme. Advisors allocate approximately 75% of equity portfolios to U.S. stocks compared to 62% in a global benchmark like the MSCI All Country World Index.³

Client polling indicates international equities continue to see demand for additions, with a net 14% of respondents seeing it as their top planned portfolio addition. Demand declined during periods of elevated uncertainty around the Middle East conflict and temporarily rebounded following the ceasefire announced in early April.⁴

When placing a greater emphasis on selectivity within international exposures, investors may consider countries and regions with credible earnings growth, improving macro fundamentals, and potential diversification benefits relative to portfolios that have become heavily concentrated in U.S. growth and AI-centric equities.

We see selective opportunities in developed market defense and industrial sectors, but have a regional preference for emerging markets at the moment. Propelled by shifting geographic allocations and exposure to essential infrastructure needed for the AI buildout, emerging markets have seen strong earnings growth and returns in 2026.

EM stocks are up 43% in the last 12 months and, historically, periods of EM stock outperformance cluster together.⁵

Within EM, we see the strongest opportunities in Asia, where we maintain strong structural conviction given the region’s central role in the global AI buildout.

While U.S. tech leadership is anchored in model development, chip design, cloud platforms, and enterprise software, Asia’s leadership is tied to semiconductor manufacturing, energy infrastructure and cost-efficient model deployment. Therefore, EM Asia offers a unique opportunity for investors to diversify away from concentration in U.S. mega-caps while still gaining access to the key beneficiaries of what is positioned to be the next global AI buildout cycle. While this structural AI-driven opportunity set remains firmly in place, risks from elevated energy prices remain.

In addition to Asia, Latin America is emerging as a key beneficiary of the global surge in AI spending, primarily through its dominant position in key commodity exports. Acceleration in AI infrastructure buildout such as data centers and power grids requires substantial amounts of industrial metals such as copper, which may benefit not only Latin American mining companies, but also drive increased investment into the region. Investors interested in getting exposure to Latin American equities may consider the iShares Latin America 40 ETF (ILF).

South Korea has emerged as a high conviction international market exposure, supported by strong sentiment, positive earnings momentum, and continued upward EPS revisions. As Figure 3 shows, South Korea has outperformed other countries in daily returns this year, in the past 12 months and annualized over the past three years.

The Korea Composite Stock Price Index (KOSPI) has rallied 86% year-to-date. Even more important for investors, valuations have actually declined, with the market now trading at approximately 7x 12-month forward P/E, the lowest levels since the Global Financial Crisis in 2008. This reflects how quickly earnings expectations in South Korea have been revised higher, with consensus forecasting EPS growth to surge three-fold year-over-year in 2026.⁶

A key driver of this strength in South Korea’s markets has been renewed semiconductor demand. Companies like SK Hynix and Samsung Electronics, which together represent roughly 50% of the MSCI Korea Index, have delivered record earnings, driven by AI-related demand for memory and compute infrastructure.⁷ The strength in earnings and positive sentiment around the AI theme has also driven a significant expansion in South Korea’s market capitalization, with Taiwan and South Korea’s combined equity markets now larger than those of India and China combined, a reversal from just a year ago.⁸

Investors may consider the iShares MSCI South Korea ETF (EWY) for targeted exposure, with holdings including Samsung, SK Hynix, Hyundai Motor, and KB Financial Group.⁹

Figure 3: Total daily returns of key developed and emerging markets

% growth, using USD as base