U.S. Stocks Sink, Foreign Markets Soar: 3 ETFs to Ride the Wave

March 11, 2025 at 10:53 AM EDT

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As relentless selling pressure grips U.S. markets and fear mounts, the benchmark SPY ETF has tumbled 4.35% year-to-date as of Monday’s close, now down nearly 9% from its 52-week high. The technology sector has spearheaded the decline, with the QQQ ETF shedding 7.5% YTD and almost 13% from its peak, leaving investors scrambling for returns beyond the usual suspects.

While dividend-yielding stocks, consumer staples, and gold offer defensive appeal, foreign markets quietly steal the spotlight. Year-to-date, China, emerging markets, and European markets have significantly outperformed their U.S. counterparts. How can investors seeking diversification and exposure to these dynamic regions navigate this shift? Here are three popular ETFs to gain exposure to those regions.

3 ETFs to Gain Exposure to Outperforming Foreign Markets

China Continues to Wow Investors in 2025

China has been one of the best-performing markets this year and has gained immense popularity among large investors and institutions. The iShares China Large-Cap ETF (NYSEARCA: FXI) has significantly outperformed its U.S. counterparts and has surged over 18% year to date.

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This comes after Chinese stocks and the broader market staged a robust recovery in 2025, driven primarily by aggressive government intervention and a shift in economic policy.

Following years of underperformance due to a property crisis, weak consumer demand, and geopolitical tensions, Beijing rolled out a comprehensive stimulus package in late 2024, including interest rate cuts, a large stock market stabilization fund, and targeted fiscal measures to boost domestic consumption.

This policy pivot, signaled by a moderately loose monetary stance and a focus on revitalizing the equity market as a wealth-building avenue, has restored investor confidence, breaking a cycle of low sentiment and sluggish investment. Coupled with stabilizing earnings, historically low valuations (with forward P/E ratios well below long-term averages), and signs of a property sector bottoming out, these efforts have fueled a rally, positioning Chinese equities to outperform many global peers year-to-date.

The iShares ETF, FXI, seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE China 25 Index. Several of its top holdings include many household names, even in America, such as Alibaba, Tencent Holdings, JD.com, and BYD.

Emerging Markets Outperform U.S. Markets in 2025

The iShares MSCI Emerging Markets ETF (NYSEARCA: EEM) has stood out this year, climbing nearly 4% YTD.

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It tracks the price and yield performance of publicly traded equities across global emerging markets, and its strength isn’t shocking, given Asia’s dominance lately.

The fund has heavy exposure to the region, with 18% in Taiwan, over 10% in Chinese stocks, and 9% in South Korea. Beyond that, it also has 16% exposure in India, 3.5% in Brazil, and 2.8% in South Africa, which are its other big geographic bets.

Top holdings are Taiwan Semiconductor Manufacturing Company, Tencent Holdings, Alibaba, and Samsung Electronics lead the pack.

The fund has $16 billion in AUM, a 2.35% dividend yield, and a 0.7% expense ratio. Notably, while it may be outperforming the U.S. market year-to-date, a broader view shows it remains range-bound, with $45 serving as the near-term ceiling. A breakout there could spark some further momentum to the upside.

European Equities Trade Near Record Highs

European stocks are crushing it so far in 2025, and the iShares Europe ETF (NYSEARCA: IEV) is proof. It hit a fresh all-time high last Friday before easing off on Monday.

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Tracking the S&P Europe 350, this ETF is up over 13% YTD and sits just 2.7% below its peak as of Monday's close.

With a market cap of $1.76 billion and $1.49 billion in AUM, it delivers a 2.34% dividend yield and a 0.67% expense ratio. Exposure-wise, it’s loaded with 21.5% in the UK, 16% in France, 14% in Germany, and 15% in Switzerland, its top four territories.

The biggest names in the fund are heavy hitters like SAP SE, ASML Holding, Novo Nordisk, Nestlé S.A., and AstraZeneca.

Strong performances from European financials and industrials have also contributed to the ETF's recent surge.

With inflation cooling and economic conditions stabilizing, European equities may continue to gain traction in the months ahead.

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