As has been widely documented, the U.S. dollar is easily one of the world’s worst-performing major currencies this year. But as is often the case in investing, one asset’s pain can be another’s gain. And that’s certainly been the case with international stocks this year.
Supported in part by dollar weakness, the MSCI EAFE Index is cruising toward an impressive annual performance. And ETFs like the ALPS O’Shares International Developed Quality Dividend ETF (OEFA) are going along for the ride. OEFA, which was previously structured as a dedicated Europe ETF, is higher by more than 21% YTD.
Alone, OEFA’s 2025 showing is impressive. But that’s even truer when considering the ETF and comparable funds accumulated stellar gains against the backdrop of U.S. trade tariffs. Those levies targeted many of the developed represented in ETFs like OEFA. But international stocks have clearly proven resilient. That confirms tailwinds accrued via the weak dollar.
OEFA Outstanding as Dollar Falters
Currency fluctuations are important considerations for investors when accessing ex-U.S. stocks. Put simply, there are occasions when the dollar is strong, potentially stifling the returns offered by international equities. And there are instances like in 2025 in which the dollar slides, propelling ex-U.S. stocks in the process.
“The outperformance of US assets has been so strong and persistent that even if you started the past decade with a diversified portfolio, market action may have left you with far less non-US exposure (both assets and currency) than you think. That may be changing, though,” noted Morningstar’s Joe Bullard.
It remains to be seen, but 2025 could be the start of something more significant for ETFs such as OEFA. For starters, international stocks are coming off a lengthy period of underperformance relative to domestic peers. Second, the dollar was strong for much of the past decade, supporting gains for domestic equities while keeping a lid on upside of foreign fare.
Late to the Party
Third, likely owing to the fact that many developed economies lowered interest rates before the Federal Reserve did — meaning the Fed was late to the party — the dollar could fall further as the U.S. central bank continues easing. Conversely, many of the countries represented in OEFA likely aren’t candidates for dramatic interest rate moves over the near term. Other factors, though ominous for U.S. taxpayers, could also support upside for OEFA.
“Additionally, policymakers continue to kick the nation’s swelling national deficit down the road, making investors skeptical of the US dollar and pressuring its value,” concluded Bullard.
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