The US Dollar and Why International Stocks are Outperforming YTD

Johnson Financial Group

Drake Dorfner

Research

7 Pages

Johnson Financial Group explains that the US dollar’s sharp depreciation in 2025 has significantly boosted the relative performance of foreign equities for US investors, as currency effects can outweigh underlying stock movement. This dynamic meaningfully alters returns—making international equities outperform even when local share performance is stable.

Key Takeaways

Dollar drag benefits: A weak dollar amplifies foreign equity returns in USD terms, even without share gains.
Behavioral flip: Historically, periods of USD strength align with US equity outperformance—and vice versa.
Rebalance opportunity: Currency dynamics support revisiting international exposure as part of strategic portfolio allocation.
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