International ETFs in 2026 are ahead of U.S. large caps for a second year. In the first half of 2026 the Vanguard FTSE Developed Markets ETF (VEA) returned 14.99% at net asset value, the Vanguard Total International Stock ETF (VXUS) 13.97% and the Vanguard FTSE Emerging Markets ETF (VWO) 11.19%, against 10.19% for the Vanguard S&P 500 ETF (VOO) [1][2][3][4]. Unlike 2025, when the euro rose from $1.083 at the end of November 2024 to $1.161 at the end of December 2025, currency was not the main driver this year: the euro ended June 2026 at $1.163, almost exactly where it started, while the yen weakened from 155.4 to 159.7 per dollar [5]. The gains came from foreign stock prices, not from a falling dollar.
International ETFs in 2026: returns to June 30
| Fund (NAV returns) | Q2 2026 | Year to date | 1 year | 3 years | 5 years | 10 years |
|---|---|---|---|---|---|---|
| VEA (developed ex-US) | 12.22% | 14.99% | 28.64% | 19.29% | 10.12% | 10.52% |
| VXUS (all-world ex-US) | 12.01% | 13.97% | 27.42% | 18.73% | 8.81% | 9.97% |
| VWO (emerging) | 11.41% | 11.19% | 24.08% | 17.13% | 5.13% | 8.49% |
| VOO (S&P 500) | 15.19% | 10.19% | 22.28% | 20.58% | 13.36% | 15.47% |
Data: Vanguard fact sheets for periods ended June 30, 2026; multi-year figures are annualized [1][2][3][4].
Two patterns are visible. First, the international lead was built in the first quarter: VOO's second-quarter return of 15.19% beat all three foreign funds, so the first-half gap comes from the U.S. market's weak start to the year [1][2][3][4]. Second, the long-term deficit remains large. Over ten years VOO returned 15.47% a year against 10.52% for VEA and 8.49% for VWO, a gap of five to seven points a year that two good years have barely dented [1][3][4].
The dollar effect on international ETF returns
An unhedged international fund's dollar return equals the local-currency return plus the change in the currency. When the dollar falls, foreign holdings are worth more in dollars; when it rises, returns are reduced. DataPorium's foreign exchange data show the euro at $1.161 at the end of December 2025, $1.178 at the end of March 2026 and $1.163 at the end of June, a round trip that left European holdings roughly unchanged by currency over the half [5]. The yen went the other way, from 155.4 per dollar in December to 159.7 in June, a 2.7% loss for dollar-based holders of Japanese stocks [5]. Japan was 21.0% of VEA and 15.4% of VXUS on June 30, 2026, so the yen alone subtracted roughly half a percentage point from VEA's first-half result [1][2][5].
In July the dollar strengthened against both: the euro fell to $1.138 and the yen to 162.6 per dollar by July 31 [5]. That is a headwind of about 2% for euro assets in a single month and a reminder that currency can erase a quarter's worth of stock gains. Investors who want foreign stocks without the currency swing can use hedged funds, but the funds discussed here are unhedged, and their ten-year records already include both dollar rallies and dollar declines.
A note on fair-value pricing
The fact sheets show each fund beating its own index over the year to date: VXUS 13.97% against 12.90%, VEA 14.99% against 14.25%, VWO 11.19% against 9.31% [1][2][3]. This is largely a timing effect. Vanguard values foreign holdings with fair-value adjustments after local markets close, while the index uses local closing prices, so the gap reverses in later periods. The quarterly figures show it: VXUS's index returned 13.57% in the second quarter against 12.01% for the fund [2]. Over ten years fund and index are within a few hundredths of a point [1][2][3].
What is inside VXUS, VEA and VWO
VXUS held 8,755 stocks, VEA 3,868 and VWO 6,332 on June 30, 2026 [1][2][3]. All three are dominated by Asian technology. Taiwan Semiconductor Manufacturing (TSM) was 4.3% of VXUS and 16.3% of VWO, and Samsung Electronics, SK hynix and ASML together were 6.5% of VXUS and 8.9% of VEA [1][2][3]. Taiwan was 34.3% of VWO, China 25.6% and India 16.5%, so the emerging fund is a concentrated bet on three markets and one industry [3]. VWO's ten largest holdings were 27.7% of assets, against 15.0% for both VXUS and VEA [1][2][3].
Valuations are lower than in the United States. VXUS traded at 18.3 times earnings and 2.3 times book, VEA at 18.7 and 2.2, and VWO at 17.1 and 2.5, compared with 27.5 times and 5.4 times for VOO [1][2][3][4]. The return-on-equity gap explains part of it: 13.3% for VXUS and 17.1% for VWO against 29.0% for VOO [2][3][4].
Costs and how investors may combine the funds
- Fees: VEA charges 0.03%, VXUS 0.05% and VWO 0.06%, against a 0.87% average for international multi-cap core funds and 1.17% for emerging market funds [1][2][3].
- One-fund approach: VXUS covers developed and emerging markets in one holding with $156,510 million in ETF assets [2].
- Two-fund approach: VEA plus VWO lets an investor set the emerging market weight; VEA held $230,949 million and VWO $122,306 million in ETF assets [1][3].
- Currency: all three are unhedged, so the dollar's direction will keep adding or subtracting several points a year [5].
Foreign stock ETFs beat the S&P 500 fund by one to five points in the first half of 2026 on local returns alone, but a stronger dollar in July showed how quickly currency can take that lead back.
Daily exchange rates for the euro, yen and other pairs are available on DataPorium's forex page, and fund comparisons on the ETF page [5].
Key takeaways
- First-half 2026 NAV returns: VEA 14.99%, VXUS 13.97%, VWO 11.19%, VOO 10.19% [1][2][3][4].
- The euro was flat over the half ($1.161 to $1.163) and the yen weakened 2.7%, so currency did not drive the outperformance [5].
- Ten-year returns still favor the S&P 500 by five to seven points a year [1][3][4].
- Foreign funds trade at 17x to 19x earnings versus 27.5x for VOO, with lower profitability [1][2][3][4].
- In July the dollar rose about 2% against the euro, a reminder of currency risk in unhedged funds [5].
Frequently asked questions
Which is better, VXUS or VEA?
VEA returned more over every period to June 30, 2026 (14.99% year to date versus 13.97%) and costs 0.03% versus 0.05%, but VXUS adds emerging markets in one fund [1][2]. The choice is about whether an investor wants to hold emerging markets separately.
How does a weaker dollar affect international ETFs?
A weaker dollar raises the dollar value of foreign holdings and adds to returns; a stronger dollar subtracts. In the first half of 2026 the euro was almost unchanged, so the effect was small, while July's 2% dollar rise against the euro was a headwind [5].
What percentage of VWO is Taiwan and China?
As of June 30, 2026, Taiwan was 34.3% and China 25.6% of VWO, with India at 16.5%; Taiwan Semiconductor alone was 16.3% of the fund [3].
Have international stocks beaten U.S. stocks over 10 years?
No. VOO returned 15.47% a year over the ten years to June 30, 2026, against 10.52% for VEA, 9.97% for VXUS and 8.49% for VWO [1][2][3][4].
Sources & References
- [1] Vanguard FTSE Developed Markets ETF (VEA) Fact Sheet as of June 30, 2026
- [2] Vanguard Total International Stock ETF (VXUS) Fact Sheet as of June 30, 2026
- [3] Vanguard FTSE Emerging Markets ETF (VWO) Fact Sheet as of June 30, 2026
- [4] Vanguard S&P 500 ETF (VOO) Fact Sheet as of June 30, 2026
- [5] DataPorium Forex: Exchange Rates for EUR/USD, USD/JPY and Other Pairs
