Vanguard's Own Forecast Puts International Stocks Ahead – And Its All-World ETF Is Already Riding the Wave

Vanguard forecasts non-US equities returning 4.9-6.9% annually over next decade vs. 4-5% for US. The FTSE All-World UCITS ETF surged 22% in 12 months, offering built-in EM exposure with 0.19% fees.

Vanguard’s in-house return projections rarely make headlines. But when the world’s second-largest asset manager tells investors that international equities will outperform their US counterparts by roughly one to two percentage points annually over the next decade, the market takes notice. The firm expects non-US stocks to deliver average annual returns of 4.9% to 6.9% over the next ten years, compared with just 4% to 5% for US equities. That forecast sits at the heart of why the Vanguard FTSE All-World UCITS ETF is attracting fresh attention.

The numbers from 2025 already support the thesis. International stocks surged roughly 30% last year, leaving the S&P 500’s 18% gain in the dust. A weakening dollar was a key tailwind: the US Dollar Index fell nearly 10% through September, boosting the value of foreign holdings for dollar-based investors. The Morningstar Global Markets ex-US Index rose 32% over the same period. Emerging markets, in particular, punched above their weight, powered by AI infrastructure spending and institutional portfolio shifts. A recent dollar recovery has pared some of those gains, but the trend remains intact.

That global rotation is reflected in the ETF’s price action. The fund closed at €158.14 on Tuesday, just a whisker below its 52-week high of €158.52 and roughly 9% above its 200-day moving average. Year-to-date it has added 8.3%, while over the trailing twelve months it has returned 22.34%. The broader backdrop of a weaker dollar and improving sentiment toward Europe, Japan, and emerging markets has provided steady support.

“A weaker dollar, a sentiment shift after a long period of undervaluation, and fiscal stimulus in Europe are all driving flows into international equities,” says Kevin Grogan, chief investment officer for systematic strategies at Focus Partners. “A global index fund is better suited to capturing this move than a narrow US portfolio.”

The ETF itself is a behemoth: roughly €37 billion in assets under management makes it the largest fund tracking the FTSE All-World Index. It charges 0.19% per year and reinvests dividends automatically, compounding returns over time. The index covers around 4,200 large- and mid-cap stocks across more than 45 countries, representing an estimated 90% to 95% of the global investable equity market. Vanguard uses a physically optimised replication strategy, holding a representative sample of roughly 85% of the constituents to keep transaction costs low, especially for less liquid emerging-market names.

A key structural advantage over the popular iShares MSCI World ETF is the built-in emerging-market exposure. While the MSCI World requires a separate emerging-markets ETF in an 88-to-12 ratio to match the FTSE All-World’s coverage, the Vanguard product does it in one ticker. That simplicity is drawing record inflows: the European ETF market saw net inflows of $124.9 billion at the start of this year, and Vanguard’s own UCITS range collected a net $490 million in March alone.

Yet broad diversification does not eliminate concentration risk. The US still accounts for roughly two-thirds of the index’s weight, with Japan at 5%, and the UK and China each around 3%. Information technology makes up about a quarter of the portfolio, with financials at 15%. The top ten holdings, including Apple, Microsoft, and Nvidia, represent some 20% of the total. That means the ETF is still heavily influenced by US mega-caps, though the additional geographic and currency spread softens the blow during periods of dollar weakness.

The next scheduled index rebalancing falls after the close on June 19, with the quarterly review following in June 2026. Recent index changes, such as the removal of FactSet Research Systems, have prompted necessary portfolio adjustments. For now, the ETF stands as a real-time gauge of whether the global rotation has staying power—and Vanguard’s own decade-ahead numbers suggest it may only be beginning.