Can International Stocks Outperform Once Again in 2026? Here's What Nobel Prize Economist Robert Shiller Has to Say.

U.S. stocks had a fantastic 2025. The S&P 500 (SNPINDEX: ^GSPC) finished the twelvemonth up 16.4%, contempt a crisp driblet successful March and April.

But investors successful planetary stocks did adjacent better. The MSCI World ex USA index, which tracks large- and mid-cap stocks from developed markets extracurricular the U.S., climbed 32.6% for the year. That was fueled by a weakening dollar and rotation distant from the U.S. owed to President Donald Trump's commercialized policies.

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U.S. equities person handily outperformed planetary stocks implicit the past 2 decades, but adding planetary vulnerability has historically been seen arsenic a bully signifier of diversification for American investors. These equities handily outperformed the S&P 500 successful the mid-2000s and respective different periods passim history.

With that successful mind, investors should beryllium asking whether planetary stocks tin physique connected their momentum from past twelvemonth and proceed to outperform successful 2026 and beyond. The economist Robert Shiller, a Nobel Prize winner, weighed successful connected the markets past quarter.

Despite planetary stocks outperforming it, the S&P 500 inactive had a precise awesome year. Even much impressive, however, is the information that it produced full returns of 26.3% and 25% successful the 2 years prior. Since 2009, the S&P 500 has produced full returns astatine an mean yearly complaint of 14.8%. That's good supra the index's historical average.

The prices of stocks successful the S&P 500 person climbed much than doubly arsenic accelerated arsenic their cumulative earnings-per-share maturation since 2009. As a result, the aggregate guardant price-to-earnings ratio (P/E) for the scale has climbed to a level seldom seen since the dot-com bubble. Large-cap U.S. stocks presently commercialized for astir 22 times guardant net expectations.

Robert Shiller prefers to usage semipermanent inflation-adjusted net past to worth the wide market. The metric helium developed, the cyclically adjusted price-earnings (CAPE) ratio, is often referred to arsenic the Shiller PE. It tin creaseless retired economical cycles and supply a amended semipermanent outlook for banal returns based connected valuation.

Today, the CAPE ratio has climbed supra 40. The lone different clip it reached this level was astatine the tallness of the dot-com bubble.

As a result, Shiller sees precise muted returns for the S&P implicit the adjacent 10 years. His astir caller forecast calls for mean yearly nominal returns of conscionable 1.5% implicit the adjacent decade. At that rate, investors are improbable to support up with inflation.