Monthly market roundup: The case for international stocks

June 2025 – Too many Americans are homebodies when it comes to stock investing—which is why TIAA Wealth Management’s investment team is urging clients to add some international flavor to their portfolios. Here are highlights from the team’s June CIO Perspectives, which presents four compelling reasons to consider non-U.S. stocks, and also from their recent FocusPoint report, which examines Moody’s downgrade of U.S. government debt.

Why should investors diversify internationally?

First, valuations abroad are attractive right now. Second, U.S. exceptionalism has been undermined at home by rising protectionism and reduced immigration (and thus a slower-growing workforce). Third, European countries are investing more in infrastructure, energy production, and their militaries. And finally, international stocks offer diversification at a time when global economies are increasingly going their separate ways.

2025 has shown why diversification is so important. In a topsy-turvy year, the Standard & Poor’s 500 equity index has eked out a mere 3% total return (through June 6). By comparison, a leading index of non-U.S. stocks—the MSCI ACWI ex-USA Index—has returned 15%. “Owning both international and domestic stocks can help smooth out market volatility and mitigate portfolio risk over the long term,” writes Niladri “Neel” Mukherjee, TIAA Wealth Management’s chief investment officer.

“It is too early to tell how the ongoing policy shift in the United States might affect long-term growth prospects,” Mukherjee continues. “That said, uncertainty over whether U.S. or non-U.S. stocks will have the upper hand going forward underscores the importance of diversification.”

Read June’s CIO Perspectives here.

U.S. Treasury bonds hit with downgrade

In other market news examined by Mukherjee this month, Moody’s downgraded its rating on U.S. sovereign debt (which covers U.S. Treasury bonds and notes) in May from the top rating of Aaa to Aa1. According to his team’s FocusPoint report, Moody’s attributed the downgrade to rising U.S. federal debt and the failure of successive presidents and Congresses to close budget deficits.

Mukherjee and his team don’t expect the downgrade to have much near-term impact on Treasury bond prices: Bond yields move in the opposite direction of bond prices, and yields on U.S. Treasury bonds ticked up a mere hundredth of a percentage point following the Moody’s announcement. That said, the downgrade underscores the importance of diversification for bond investors. The downgrade, they write, “puts a spotlight on long-term fiscal sustainability, a concern we have highlighted frequently over the past few months.”

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For more insights on market and economic conditions—and to discuss the implications for your investment portfolio and financial plan—talk to your TIAA Wealth Management advisor. Don’t yet have an advisor? Schedule an appointment.