The Resurgence of International Value Investing in a Shifting Global Market

The global investment landscape in 2025 is nothing short of a seismic shift. For years, U.S. stocks-particularly tech darlings-dominated headlines and portfolios. But here's the twist: international value investing is staging a comeback, and it's not just a fluke. The confluence of monetary policy normalization, trade policy upheavals, and a global rebalancing of capital flows has created fertile ground for non-U.S. equities, especially in emerging markets. Let's break down why value is gaining ground and how investors can position themselves to capitalize on this trend.

Monetary Policy Normalization: A Tailwind for International Value

The U.S. Federal Reserve's first rate cut in September 2025 marked a pivotal moment. After years of tightening, the Fed's pivot to easing has sent ripples across global markets. As stated by a report from Twelve Points Wealth Management, this shift "provided a boost to riskier assets" and signaled the end of the U.S. rate-hiking cycle 2025 Q3 Market Review - Twelve Points Wealth Management^[2]. Meanwhile, the Bank of Japan's reluctance to raise rates amid U.S. tariff uncertainties has kept the yen weak, further amplifying the appeal of international equities 2025 Q3 Market Review - Twelve Points Wealth Management^[2].

The normalization of U.S. monetary policy has also triggered a steepening yield curve, creating opportunities in short-term bonds. But for equity investors, the real story lies in the dollar's weakening grip. A weaker greenback has made non-U.S. stocks more attractive, with emerging market equities surging 11% in Q3 2025 alone 2025 Q3 Market Review - Twelve Points Wealth Management^[2]. This isn't just a currency play-it's a structural shift. As global capital reallocates away from overvalued U.S. tech stocks, value-oriented international markets are stepping into the spotlight.

Market Rebalancing: The Great Rotation

The U.S. market's dominance in global benchmarks is waning. According to Morningstar, international stocks have outperformed U.S. counterparts by over 11 percentage points in 2025 Global Economic Outlook Shows Modest Change Amid Policy Shifts and Complex Forces^[1]. This gap has forced institutional and retail investors alike to rebalance portfolios, trimming overexposed positions in tech giants like NVIDIA and Tesla while adding high-quality international funds January Market Rebalancing: Trading Tips for 2025 | Trade Ideas^[4].

Why is this happening? The answer lies in valuations. U.S. stocks, particularly in the tech sector, have been trading at premium multiples for years. In contrast, emerging markets and developed international equities now offer more attractive price-to-earnings ratios and stronger earnings growth. ClearBridge Investments notes that international markets have already begun a rotation toward value, a trend expected to accelerate as U.S. dominance in global benchmarks continues to erode 2025 Q3 Market Review - Twelve Points Wealth Management^[2].

Trade Policy Uncertainty: A Double-Edged Sword

The U.S.'s sweeping 2025 tariffs initially caused chaos in global trade, but the long-term impact has been more nuanced. While supply chains have become more fragmented, emerging economies have benefited from redirected capital flows and fiscal stimulus. For example, countries like India and Brazil have seen robust growth in manufacturing and services, sectors that are now undervalued relative to their U.S. counterparts Global Economic Outlook Shows Modest Change Amid Policy Shifts and Complex Forces^[1].

However, trade policy uncertainty isn't all good news. Deflationary pressures in China and geopolitical risks in Europe have created headwinds. Yet, these challenges also highlight the importance of diversification. As Russell Investments argues, "Resilient and diversified investment strategies are essential to navigate evolving market conditions" 2025 Annual Global Market Outlook | Russell Investments^[3]. International value investing, with its focus on undervalued sectors and geographies, offers a hedge against these risks.

The Role of Intangible Assets: A New Frontier

One often-overlooked factor in this resurgence is the rise of intangible assets. Traditional value investing metrics-like price-to-book ratios-struggle to capture the value of intellectual property, software, and brand equity. As the Chicago Federal Reserve notes, investments in intangible assets are less sensitive to interest rate changes than tangible investments 2025 Q3 Market Review - Twelve Points Wealth Management^[2]. This means that value strategies incorporating intangible assets may outperform in a low-rate environment, a critical consideration as central banks normalize policy.

Actionable Insights for Investors

For those looking to capitalize on this shift, the playbook is clear: rebalance toward international value strategies. Morningstar recommends funds like the Vanguard FTSE All-World ex-US ETF (VEU) and the iShares Core MSCI Total International Stock ETF (IXUS), which offer broad exposure to non-U.S. equities Global Economic Outlook Shows Modest Change Amid Policy Shifts and Complex Forces^[1]. Morgan Stanley's portfolio managers also emphasize "quality and disciplined investment strategies," including processes like "mistake management" to mitigate risks in volatile markets 2025 Annual Global Market Outlook | Russell Investments^[3].

The Road Ahead

The U.S. economy is projected to grow at a trend-like 2.0% in 2025, but global headwinds-trade policy uncertainty, deflationary pressures, and geopolitical risks-remain. For investors, the key is to stay nimble. As the IMF notes, "Global economic outlooks are shaped by complex forces, and adaptability is the hallmark of successful investing" Global Economic Outlook Shows Modest Change Amid Policy Shifts and Complex Forces^[1].

International value investing isn't a one-size-fits-all solution, but it's a compelling antidote to the overconcentration in U.S. tech stocks. By embracing the opportunities in emerging markets, leveraging the Fed's easing cycle, and diversifying across sectors and geographies, investors can position themselves to thrive in this new era.