All Abroad! International Equity Leadership Continues to Pull Ahead

International Equity Leadership Continues to Pull Ahead

International equities delivered a standout year in 2025, outperforming U.S. equities by the widest margin in more than three decades (see Figure 1). That strength wasn’t limited to one region—Europe, Japan, and Emerging Markets all contributed to a shift that reflects a healthier, more balanced global earnings backdrop.

Figure 1: Relative Calendar Year Returns of International and U.S. Equities (1990 – 2025)

Source: Guardian Capital LP, based on data from Bloomberg as of December 31, 2025.

Chart shows the relative difference in calendar year net total returns in Canadian dollars for the MSCI EAFE Index less the S&P 500 Index. Positive values indicate the MSCI EAFE Index outperformed, while negative values indicate the S&P 500 Index outperformed.

Why International Equities Are Gaining Momentum

After years of narrow leadership from a small group of U.S. mega-cap technology companies, global markets are beginning to broaden. Earnings expectations across many international markets have improved as inflation has eased, policy paths have become clearer, and trade activity has stabilized. This broad-based strength stands in contrast to the U.S., where earnings leadership has become increasingly concentrated and tied to the capital-intensive buildout of Artificial‑Intelligence (AI) infrastructure.

For investors, that means investment opportunity is no longer predominantly a single sector or theme. International markets are benefiting from stronger fundamentals in industrials, consumer companies, financial services, and technology-linked businesses that sit outside the U.S. mega‑cap complex.

Figure 2: Relative Earnings Growth Expectations Since December 31, 2024

Source: Guardian Capital LP, based on data from Bloomberg as of January 31, 2026. Aggregate analyst consensus of Forward EPS Estimates indexed to 100 on December 31, 2024. Forward EPS estimates are based on analyst forecasts of a company’s earnings per share 12 months in the future.

Valuations Remain Attractive

Despite strong performance in 2025, international equities continue to trade at meaningful discounts to U.S. markets. The valuation gap remains near historically wide levels, offering a potentially more attractive starting point for future returns.

Meanwhile, the narrowness of recent U.S. market leadership in AI-related stocks —and the heavy spending required to sustain it—has introduced new questions around how long it can be sustained. For investors looking to rebalance portfolios or diversify sources of return, international equities offer both breadth and value.

Figure 3: International Equities Remain Significantly Cheaper than U.S. Equities

Source: Guardian Capital LP, based on data from Bloomberg as of December 31, 2025. The differential series represents aggregate analyst consensus of forward P/E ratio of the S&P 500 Index less forward P/E ratio of the MSCI EAFE Index. Forward price to earnings represents the ratio of current stock price to forward EPS (as defined in Figure 2).

Long-Term Tailwinds are Strengthening the Case

Several structural forces are supporting international markets:

For Canadian investors, currency effects may vary, but the fundamental backdrop behind these trends remains of strong return potential.

How the Guardian International Equity Select Fund Invests

The Guardian International Equity Select Fund (the Fund) uses a quadrant-based approach when investing in international companies, focused on three key pillars:

With a concentrated portfolio of 15–30 global companies, the Fund focuses on select businesses that the Manager believes can compound value over time, rather than relying on broad and passive index exposures.

Next Stop: Opportunity

International leadership has returned. Earnings are broadening more globally. Valuations remain appealing. And long-term trends—from infrastructure to AI—are reshaping global markets in ways that favour companies beyond the U.S. mega‑cap landscape.

Learn how the Guardian International Equity Select Fund can fit into your portfolio.

Speak with your financial advisor or explore the Fund’s series by clicking the links below:

Series A Series F GIES ETF

Returns are presented in CAD, unless otherwise indicated.

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Published: February 2026