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Strategies for a successful retirement

Why International Stocks Are Gaining Attention—Especially Among Retirees

After years of U.S. stock dominance, some investors are beginning to question whether it's time to pivot. Triggered by escalating trade tensions and market instability, the shift is moving capital toward international equities—a trend that could hold particular value for retirees seeking balance, income, and long-term security.

Since the announcement of new tariffs, major U.S. indexes have been under pressure. The S&P 500 is down about 10% year-to-date, with the Nasdaq slipping more than 16% and the Dow trailing close behind. In contrast, international benchmarks such as the MSCI EAFE, which tracks developed markets outside the U.S. and Canada, have posted gains of around 7%.

Challenging the Myth of U.S. Market Exceptionalism

While U.S. stocks have historically outperformed global counterparts, the recent pullback has challenged the notion of U.S. market exceptionalism. This shift is not only shaking institutional portfolios—it’s also prompting everyday investors, including retirees, to reassess their allocation strategies.

The uncertainty surrounding tariffs and trade policy has compounded concerns, with market volatility no longer contained to stocks alone. Bonds and the U.S. dollar have also weakened, disrupting the traditional safe-haven triad.

What This Means for Retirees

For retirees who typically prioritize stability and income, this moment presents both caution and opportunity. Diversification is increasingly being viewed as essential, not optional. Global markets may offer smoother returns, particularly in portfolios that blend international stocks with more stable U.S. assets.

Moreover, retirees who have long focused solely on domestic investments may find greater resilience in portfolios that include international exposure—especially given the cyclical nature of global market performance. Historical patterns show that international stocks often outperform U.S. equities in cycles that can last nearly a decade or more.

Global ETFs Offer a Balanced Approach

This does not mean abandoning U.S. stocks entirely. The domestic market still holds fundamental strengths and, by many measures, looks undervalued. However, retirees nearing or already in their distribution years may benefit from a more globally balanced approach—one that factors in currency shifts, trade disruptions, and sector-specific growth opportunities abroad.

Broad-market ETFs that track global equities—like those mirroring the Vanguard Total World Stock Index—are becoming more attractive to investors looking for low-cost diversification. A sensible starting allocation might reflect a two-thirds domestic and one-third international blend, although retirees with lower risk tolerance may wish to fine-tune their exposure to reduce currency-related volatility.

Currency Trends Add to the Case for Diversification

The renewed interest in foreign markets has also been driven by currency performance. In the past, a strengthening dollar helped soften the blow of declining U.S. stocks. Recently, however, both stocks and the dollar have fallen, offering less of a cushion. This has further strengthened the case for including international stocks, which have demonstrated relative resilience.

The Importance of Strategic Rebalancing

For retirees managing fixed incomes or considering drawdowns from retirement portfolios, the key takeaway is not to make reactionary moves. Instead, it's an opportune time to review portfolio allocations and rebalance where necessary. Rebalancing allows investors to shift funds from overvalued or underperforming sectors into more promising opportunities—potentially buying into international markets at more favorable entry points.

Conclusion: A Smarter Way to Manage Risk

Ultimately, diversification isn’t about chasing returns abroad—it’s about managing risk at home. The current market conditions serve as a reminder that relying too heavily on one region, even one as historically strong as the U.S., may not always deliver the consistency retirees need.

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