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iDev Outperforms VOO in 2026: International Stocks Take the Lead

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  //stocks-investing.news-articles.net/content/202 .. -in-2026-international-stocks-take-the-lead.html
  Published in Stocks and Investing on Friday, November 28th 2025 at 13:09 GMT by Seeking Alpha

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iDev vs. VOO – A 2026 Outlook Favoring International Stocks

In a timely comparison that has already sparked a debate among portfolio managers, a recent Seeking Alpha piece titled “iDev vs. VOO – More Favorable Outlook for International Stocks Heading into 2026” argues that the next five‑year window will see developed‑market equities outside the United States out‑performing the S&P 500. The author uses a blend of macro‑economic forecasts, sector‑level dynamics, and relative valuation screens to support a strategic tilt toward the iShares MSCI Developed Markets ETF (ticker: iDev) versus the Vanguard S&P 500 ETF (VOO).

Below is a distilled synopsis that covers the core arguments, evidence, and implications for investors looking ahead to 2026.

1. Macro‑Economic Rationale

1.1 Fed Policy & Inflation Outlook

The article opens by outlining the U.S. inflation narrative. While headline inflation remains stubbornly high, the author cites the Federal Reserve’s recent “taper‑treat‑tension” stance, noting that the central bank is expected to continue tightening until inflation reaches the 2 % target. The resulting rise in U.S. short‑term rates is projected to compress S&P 500 earnings, with a 3–4 % real‑rate hike dampening growth expectations.

In contrast, the European Central Bank (ECB) and Bank of England have signaled a more gradual path to rate cuts, as their inflation is forecast to decline more swiftly due to supply‑chain normalization and weaker energy price pressures. Emerging markets, particularly China, are expected to benefit from an easing monetary policy, as the People's Bank of China is likely to keep its policy rates lower than those in advanced economies.

1.2 Growth Divergence

The Seeking Alpha analysis employs growth‑rate data from the IMF and World Bank. It projects that:

• U.S. GDP growth will average 1.8 % annually from 2024–2026.
• Eurozone GDP growth is expected to rebound at 2.3 % per annum, buoyed by fiscal stimulus.
• China’s growth is projected to accelerate to 5.0 % in 2025, driven by infrastructure spending and a surge in consumer demand.

These figures underpin the thesis that international markets will outpace U.S. equities, especially as China and other emerging economies recover from the pandemic‑induced slowdown.

2. Valuation & Yield Comparison

2.1 Price‑to‑Earnings and Enterprise Value

The author highlights that, as of the article’s publication date, the iDev portfolio is trading at an average P/E of 17.5, whereas VOO sits at 21.3. Even after adjusting for currency fluctuations, the valuation differential remains significant, suggesting that international equities are less “expensive” than their U.S. counterparts.

2.2 Dividend Yield & Income

A key differentiator emphasized is the higher dividend yield of iDev (4.2 %) compared to VOO’s 1.5 %. The piece cites the “dividend‑growth” track record of non‑U.S. utilities and financials, arguing that higher income will cushion portfolio volatility during a potential tightening cycle.

3. Sector & Geographic Breakdown

In contrast, VOO’s sector weights are more concentrated in U.S. Technology (35 %) and Consumer Discretionary (20 %). The author warns that this concentration exposes the portfolio to sector‑specific headwinds, such as a slowdown in the U.S. tech bubble.

Geographically, iDev’s exposure is diversified across 31 developed markets, with the largest weights in Japan, the United Kingdom, and Canada. This breadth mitigates country‑specific risk and aligns with the article’s thesis that a well‑balanced international allocation can outperform a U.S.-centric strategy.

4. Risk Considerations

4.1 Currency Risk

While the article acknowledges that currency swings could erode returns, it argues that the current U.S. dollar weakness relative to major currencies (euro, yen, and pound) positions iDev as a natural hedge against a potential U.S. currency rebound. The author recommends monitoring FX volatility and considering hedged alternatives (e.g., HEDG) if the dollar strengthens markedly.

4.2 Political & Regulatory Risk

International equities face additional headwinds such as trade disputes, regulatory reforms, and geopolitical tensions (e.g., U.S.–China trade frictions). The article suggests that these risks are offset by the diversified nature of iDev and the historically resilient nature of developed‑market corporate earnings.

5. Tactical Allocation Implications

1. Overweight iDev in 2024–2025: The article recommends allocating 35–40 % of the equity portfolio to iDev to capture growth in Europe and Asia, while maintaining a 25–30 % stake in VOO to preserve core U.S. exposure.
2. Add a dividend‑heavy tilt: Investors can further enhance income by allocating 10 % to the iShares MSCI Emerging Markets ETF (EEM) or similar, given the article’s note that emerging‑market financials are poised for a rebound.
3. Monitor interest‑rate trajectory: If U.S. rates rise faster than anticipated, the author advises rebalancing toward iDev to mitigate earnings compression in the S&P 500.

6. Bottom‑Line Takeaway

The Seeking Alpha piece concludes that, by 2026, a well‑diversified international allocation—specifically through iDev—offers a more attractive risk‑adjusted upside than staying heavily invested in the U.S. market via VOO. Key drivers include:

• Lower valuations across developed markets.
• Higher dividend yields that can cushion volatility.
• A favorable macro‑economic divergence where non‑U.S. growth is expected to outpace U.S. growth.

The recommendation is not to abandon VOO entirely; rather, to re‑balance toward international exposure, thereby harnessing growth potential while preserving core U.S. fundamentals.

Quick Reference Table

Final Thought

In an era of monetary tightening, divergent growth rates, and shifting global risk appetites, the iDev vs. VOO debate underscores a broader trend: investors who can recognize and act on international valuation opportunities are positioned to generate superior long‑term returns. By following the macro‑trends highlighted in the Seeking Alpha article and executing a disciplined allocation strategy, portfolio managers can capitalize on the projected out‑performance of international stocks heading into 2026.