Two Markets, Two Stories: How Value Stocks Have Outperformed Internationally

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2 hours ago

September 10, 2025

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Jenna Ross

Graphics & Design

Zack Aboulazm

The following content is sponsored by MSCI

Value Stocks: U.S. Drag, International Boost?

Key Takeaways

Outside the U.S., value stocks have outperformed their benchmark.
This is in contrast to the U.S., where value investing has underperformed over various timeframes.
Investors can consider incorporating the value factor in their international allocations.

Value stocks are living a double life—and if you’re looking only at the U.S., you might be missing the plot. While value strategies have struggled on U.S. turf, markets beyond American borders tell a very different story.

This graphic, in partnership with MSCI, shows how value stocks outside the U.S. have outperformed their benchmarks while underperforming domestically.

What is Value Investing?

Value investing involves buying stocks that appear undervalued. This means looking at metrics like price-to-book value, price-to-forward earnings, and enterprise value-to-cash flow from operations.

Value is one element of factor investing that investors can look at when targeting characteristics that can help explain the bulk of stocks’ risk and return.

The Performance of Value Stocks

In recent years, the success of the value factor looks very different depending on where the stocks are located. The table below shows the difference in return between the value index and its benchmark.

Timeframe	Value Outside U.S.	U.S. Value
Year-to-Date	+6.2%	-0.3%
3yr	+5.0%	-8.5%
5yr	+5.4%	-3.4%
10yr	+0.0%	-5.1%
Since Nov. 28, 1997	+2.4%	-0.1%

Source: MSCI, data as of July 31, 2025. Apart from year-to-date data, numbers are annualized gross returns. Value outside the U.S. represented by the MSCI World ex USA Enhanced Value Index (USD) with the MSCI World ex USA as the benchmark. U.S. value represented by the MSCI USA Enhanced Value Index (USD) with the MSCI USA Index as the benchmark.

Within the U.S., value stocks have lagged their benchmark over various timeframes. This was partly due to a long period of low interest rates and modest inflation which favors growth stocks. In particular, mega-growth stocks like the Magnificent Seven have dominated stock market performance in America. These stocks’ ultra-high valuations mean they are excluded by many value strategies.

However, in developed markets outside the U.S., value investing has seen stronger returns than its benchmark. Internationally, mega-cap stocks do not dominate the market, leaving more potential for value to outperform.

Financials, a core component of value strategies, saw a stronger rebound in markets like Europe, where banks were coming off years of negative rates. Unlike in the U.S., even modest post-COVID rate hikes significantly lifted margins. And with lower starting valuations in regions like Europe and Japan, these value-oriented banks had more room to rise as profitability improved.

A World of Value

While value stocks have underperformed in the U.S. and growth stocks have dominated the narrative, this is not the case elsewhere.

Historically, companies that appear undervalued have beaten their benchmarks in other developed markets. For the international allocations within portfolios, investors can consider incorporating value stocks.

Discover 50 years of lessons shaping the future in MSCI’s free report Factor Indexing Through the Decades.

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Two Markets, Two Stories: How Value Stocks Have Outperformed Internationally