The Dollar’s Slide Is Reshaping the Vanguard All-World ETF’s Fortunes

A weakening dollar and cheap international stocks drive a structural shift, with the Vanguard FTSE All-World UCITS ETF outperforming US markets since late 2024.

For years, a rising dollar and a tech-heavy Wall Street made the Vanguard FTSE All-World UCITS ETF a simple bet on American dominance. That narrative is fracturing. A dramatic rotation out of US equities has handed the fund a 15 percent performance advantage over American markets since late 2024, according to Seymour Asset Management, and the shift is showing no signs of fading.

The ETF, which tracks the FTSE All-World Index and holds roughly €35 billion in assets, has climbed nearly 6 percent in euro terms during the first four months of 2025. The catalyst is twofold: a weakening greenback and a valuation gap that has made stocks outside the US look cheap relative to the mega-cap tech names that have dominated for so long.

A Structural Shift, Not a Blip

What began as a short-term recovery in international equities is increasingly taking on the hallmarks of a structural upswing. Asian markets, in particular, are driving the momentum. Taiwan and South Korea sit at the heart of the global semiconductor supply chain, and the insatiable demand for AI hardware is funneling directly into their corporate earnings. Pricing power and tight capacity are supporting share prices in a way that feels durable.

The index itself is built to capture this breadth. It holds roughly 4,200 companies across developed and emerging markets. The US still commands a 64 percent weighting, with Japan a distant second, but more than a tenth of the fund is allocated to emerging markets—a slice that is currently delivering outsized returns. Vanguard uses a physically optimised replication strategy, buying a representative sample of stocks rather than every single name, which helps keep transaction costs low in less liquid markets.

Currency Tailwinds for European Investors

For holders of the ETF based in Europe, the dollar’s trajectory is a critical variable. Goldman Sachs expects the US currency to weaken further through the rest of the year, citing declining international demand for American assets. Fidelity’s analysts echo that view, arguing the dollar remains overvalued against most major peers.

Because the Vanguard fund is unhedged, a falling dollar automatically boosts the value of its non-US holdings—roughly a third of the portfolio. That currency effect has already provided a meaningful tailwind and could intensify if the rotation out of American equities accelerates.

The Tech Earnings Gauntlet

Yet the fund’s fortunes are not solely tied to currency moves or emerging-market rallies. The US technology sector still exerts enormous influence. Information technology alone accounts for a quarter of the portfolio, and the largest single holdings—Apple, Microsoft, and Nvidia—remain the dominant performance drivers.

This week brings a dense calendar of earnings that will test the market’s resilience. Palantir reports after the US close on Monday, with analysts forecasting revenue of $1.54 billion and earnings per share of $0.28. Walt Disney follows on Wednesday, targeting quarterly sales of nearly $25 billion and EPS of $1.49.

Beyond corporate results, a wave of US labour market data will shape the near-term outlook. The JOLTS report on Tuesday, ADP private-sector payrolls on Wednesday, and the official employment report on Friday all have the potential to move markets. So far, the earnings season has been supportive: 84 percent of S&P 500 companies that have reported have beaten analyst expectations, according to Deutsche Bank.

Central Banks Push Back on Rate Hopes

The monetary policy backdrop remains cautious. The Bank of England held its key rate at 3.75 percent at the end of April, marking the third consecutive meeting without a cut. Federal Reserve Chair Jerome Powell continues to flag stubborn inflation, while ECB President Christine Lagarde has warned of negative supply shocks stemming from geopolitical tensions in the Middle East.

That caution has not derailed the equity rally, but it has kept a lid on exuberance. The old adage “sell in May and go away” has historically been a losing strategy—Deutsche Bank found it underperformed a simple buy-and-hold approach in 25 of the last 39 years—and the current fundamental backdrop suggests this year may be no exception.

A Concentration Problem That Diversification Solves

One of the more striking data points to emerge from the current market environment is how underweight international stocks have become. In the MSCI World Index, the share of non-US equities recently fell to 27.5 percent, well below the long-term average. The Vanguard FTSE All-World ETF, with its fixed allocation to emerging markets and quarterly rebalancing, automatically pushes back against that concentration.

As long as the rotation out of US equities persists, that broad diversification offers a tangible structural advantage. The fund’s performance over the coming days will hinge on whether tech earnings confirm the growth narrative and whether Friday’s jobs data can sustain the market’s confidence. But the bigger story may already be unfolding in the currency markets and in the emerging-world factories that are quietly powering a global rebalancing.