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Does anyone think a rotation to international and small-caps started last year?
Posted on 12/16/25 at 8:02 am
Posted on 12/16/25 at 8:02 am
Intl is ahead for 2025 and it's been like 15 years of U.S. out performance and large cap dominating small in the U.S.
AI is the big question obviously and is still led by the major U.S. large growth stocks.
But 2025 was the first year in forever that small cap and intl showed signs of life. Weakened dollar? Over stretched evaluations for mag 7 and tech?
Thoughts?
AI is the big question obviously and is still led by the major U.S. large growth stocks.
But 2025 was the first year in forever that small cap and intl showed signs of life. Weakened dollar? Over stretched evaluations for mag 7 and tech?
Thoughts?
6
Posted on 12/16/25 at 8:44 am to ghost2most
The economy has outgrown small caps. There’s not enough billion dollar companies to move the needle in a world of trillion dollar corps. And the few that succeed have low ceilings, because they’ll be purchased by a competitor once they reach the mid cap threshold.
For internationals, the average person can’t effectively price discounts for valuations related to national interests or corruption unique to each region.
For internationals, the average person can’t effectively price discounts for valuations related to national interests or corruption unique to each region.
Posted on 12/16/25 at 8:58 am to ghost2most
I would guess so? My finance guy increased my international exposure about 8 months ago so I guess he saw something he liked.
Posted on 12/16/25 at 9:02 am to lsuconnman
quote:
The economy has outgrown small caps. There’s not enough billion dollar companies to move the needle in a world of trillion dollar corps. And the few that succeed have low ceilings, because they’ll be purchased by a competitor once they reach the mid cap threshold.
For internationals, the average person can’t effectively price discounts for valuations related to national interests or corruption unique to each region.
Not sure I agree. Wouldn't the small caps just get bought by large caps for a premium which is what you want as an investor?
As for intl, I just would buy index funds. I'm not researching anything.
Posted on 12/17/25 at 7:05 am to ghost2most
I've had an international fund for 15 years. I would routinely reduce because it was dragging down my yields. 2025 is the first that I can recall that the international fund is bolstering yields for the portfolio. So much so that when I looked and saw my portfolio was ahead of the S&P, I said, "How can that be?" It was because of the international fund.
Posted on 12/17/25 at 7:17 am to ghost2most
Considering I finally pulled out almost entirely of my small cap funds at the end of last year. Probably means small caps will start to run if I’m going by my historic reality
Posted on 12/17/25 at 7:21 am to Ace Midnight
I’ve tried to put a little in international funds but have never been very optimistic with them.
Could just be a situation where large caps and tech is just so inflated that there has to be some better perceived value elsewhere
Could just be a situation where large caps and tech is just so inflated that there has to be some better perceived value elsewhere
Posted on 12/30/25 at 6:31 am to ghost2most
Rebalanced my 403(b) yesterday to 50% large cap/growth, 30% small/mid cap, and 20% international. I was roughly 65% large cap/growth before that. I'll allocate future contributions to reflect current position sizes, then probably flip back heavy (70%) to large-cap/growth in 12-18 months. We'll see in 2 years if this was a smart or bad decision. The valuations for large/mid/small/international seem like they SHOULD flip cycles as far as ROI.
Posted on 12/30/25 at 9:45 am to ghost2most
I hold like 35% international. Up over 35% since 2022.
I like the diversification and good dividends. Think I am getting over 4% yield on cost.
I also hold a good chunk of small caps.
It’s not hard to imagine scenarios where the magnificent 7 have a big sell off that makes my S&P 500 shares take a shite while international and/or small caps are up for 10 years or so. In fact, data shows this has been the historical cycle.
Yes S&P 500 would almost certainly bounce back and still outperform in the long-run, although you never know. But selling shares at the bottom of the dip because you need the money would hurt the portfolio a lot. If you hold good performing international and small caps during an S&P bear market, you can enjoy collecting dividends and sell the gains while avoiding locking in S&P losses.
I like the diversification and good dividends. Think I am getting over 4% yield on cost.
I also hold a good chunk of small caps.
It’s not hard to imagine scenarios where the magnificent 7 have a big sell off that makes my S&P 500 shares take a shite while international and/or small caps are up for 10 years or so. In fact, data shows this has been the historical cycle.
Yes S&P 500 would almost certainly bounce back and still outperform in the long-run, although you never know. But selling shares at the bottom of the dip because you need the money would hurt the portfolio a lot. If you hold good performing international and small caps during an S&P bear market, you can enjoy collecting dividends and sell the gains while avoiding locking in S&P losses.
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