After years of lagging behind U.S. equities, international stocks are staging a remarkable comeback in 2025. The turnaround comes amid growing concerns over trade tensions, rising inflation, and a slowing U.S. economy under the new administration.
While the S&P 500 has slipped into negative territory, down over 3% this year,international markets particularly in Europe and emerging economies are benefiting from fiscal stimulus, record defense spending, and attractive valuations.
Against this backdrop, global investors are increasingly turning to international funds in search of both growth and stability. Leading the pack, two Vanguard ETFs stand out, delivering strong returns and outpacing the S&P 500 by a wide margin.
Vanguard FTSE Europe ETF
The Vanguard FTSE Europe ETF (NYSEARCA: VGK) tracks the FTSE Developed Europe All Cap Index, providing investors with exposure to stocks across developed European markets.
The fund holds 1,263 stocks, with top positions including German software giant SAP SE, Dutch semiconductor leader ASML Holdings (NASDAQ: ASML), and Danish drugmaker Novo Nordisk (NYSE: NVO), among others. Spanning sectors such as technology, healthcare, and consumer goods, the ETF provides broad sectoral diversification.
True to Vanguard’s low-cost investing approach, the fund carries an annual expense ratio of just 0.06%, meaning a $500 investment incurs only $0.30 in annual fees.
Despite delivering a modest average annual return of 5.14% since its inception on March 4, 2005 lagging the S&P 500 VGK has outperformed so far in 2025, with a year-to-date return nearing 15%, currently trading at $72.71.
Still, while VGK’s recent rally reflects optimism driven by fiscal stimulus measures and rising defense spending across Europe, the outlook remains mixed. Geopolitical risks including uncertainty over Russia-Ukraine peace talks and the potential for new U.S. tariffs on European imports could weigh on future returns.
For investors looking to diversify geographically, the Vanguard FTSE Europe ETF offers broad exposure to established European markets but comes with potential risks tied to shifting global dynamics
Vanguard Total International Stock ETF
The Vanguard Total International Stock ETF (NYSEARCA: VXUS) seeks to track the performance of the FTSE Global All Cap ex US Index.
The fund offers investors broad exposure to both developed and emerging markets outside the United States, providing access to companies across various sectors and regions.
VXUS has been a standout performer in 2025, delivering a return of over 8% year-to-date, making it one of the top-performing international ETFs this year. As of press time, VXUS is trading at $63.96, offering a dividend yield of nearly 3.10%, more than double that of the S&P 500.
With a diversified portfolio of 8,580 stocks, the ETF’s top holdings include global heavyweights like Taiwan Semiconductor Manufacturing Company (NYSE: TSM), Tencent Holdings, SAP SE, Alibaba Group, among others.
Regionally, the fund allocates approximately 40.10% to Europe, 26.50% to emerging markets, and 25.30% to the Pacific region, ensuring broad geographic diversification.
Despite its expansive reach and strong performance, VXUS remains cost-effective. The fund carries a low expense ratio of 0.05%, meaning a $500 investment incurs just $0.25 annually in fees.
For investors looking for global equity exposure with reliable income potential and a buffer against U.S. market volatility, VXUS stands out as a solid pick.
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