VXUS ETF outperforms S&P 500 in 2026, marking a shift in international diversification returns.

In 2026, Vanguard's VXUS ETF, which covers over 8,000 international stocks, has outperformed the S&P 500 with a 10% return year-to-date versus the S&P 500's 8%. This marks the first meaningful lead for VXUS since 2021, driven by factors like a softer dollar and improving non-U.S. earnings. Despite this short-term gain, over the past five and ten years, VXUS has significantly lagged behind the S&P 500 in cumulative returns. VXUS remains a cost-effective way to gain broad international exposure, suitable for investors seeking diversification without timing regional markets, though currency risks and lower long-term growth compared to U.S. tech-heavy indexes remain considerations.