The Vanguard FTSE All-World ex US Index Fund ETF (VEU) has achieved modest gains in 2026, outperforming the S&P 500 due to its attractive valuations. Analysts highlight its limited exposure to the Middle East at 2.7 percent, while noting investments in energy-importing regions like Europe and Japan. Despite risks, the ETF's valuation discount is seen as excessive, leading to a buy recommendation.
International stocks in the Vanguard FTSE All-World ex US Index Fund ETF (VEU) have modestly outperformed the S&P 500 early in 2026, driven by cheaper valuations compared to the U.S. benchmark. This performance comes amid surging energy prices, which benefit certain allocations within the fund.
VEU primarily invests in low-growth, energy-importing areas such as Europe and Japan, raising concerns about potential weak earnings growth. Its exposure to the Middle East remains modest at 2.7 percent. In contrast, the fund allocates 11.8 percent to regions like Canada and Australia, which are viewed as beneficiaries of the energy crisis.
Analysts argue that the ETF's valuation discount relative to the S&P 500 is overly pronounced, positioning VEU as a buy opportunity. However, risks include a high allocation to cyclical sectors and the possibility of a reversal in the recent weakening of the U.S. dollar.
The analysis, published on March 7, 2026, emphasizes that past performance does not guarantee future results, and no specific investment advice is provided. The author discloses no positions in related securities and expresses personal opinions without compensation beyond the platform.
