Wall Street experienced massive volatility in the first quarter, while international markets remained relatively stable or gained momentum. Trade uncertainty under the new U.S. administration has fueled concerns about rising inflation and a slowing U.S. economy, which has worked in favor of international markets.
Vanguard Tax Managed Fund FTSE Developed Markets ETF VEA is up 7.4% this year (as of March 28, 2025), while the SPDR S&P 500 ETF Trust SPY has lost about 5%. Meanwhile,iShares Asia 50 ETF AIA has jumped 7.6% in 2025, and iShares MSCI Emerging Markets ETF EEM has advanced 4.8%.
Cheaper Valuation: Most international markets and ETFs have been undervalued in comparison to U.S. stocks and ETFs.The P/E ratio of the largest Europe ETF Vanguard FTSE Europe ETF VGK stands at 17.0X while its U.S. counterpart — Vanguard S&P 500 ETF VOO — trades at a P/E of 27.5X.
iShares MSCI Japan ETF EWJ has a P/E ratio of 16.57X. The ETF EEM trades at a P/E of15.07X. iShares China Large-Cap ETF FXI trades at a P/E of 13.27X. iShares India 50 ETF INDY has a P/E of 23.51X while iShares MSCI Brazil ETF EWZ has a P/E of 9.47X.
Stimulus Abroad: The European Central Bank has been on a rate-cut spree. India and China have also been on a path of policy stimuli (either fiscal or monetary or both). Although the Bank of Japan has been hiking rates, the interest rate backdrop remains low.
In contrast, the United States has taken a different approach as the Department of Government Efficiency has prioritized budget cuts, reducing federal expenditures rather than expanding them. The Fed has also been acting less dovish.
Against this backdrop, below we highlight a few winning country exchange-traded funds (ETFs) of the first quarter.
iShares MSCI Poland ETF EPOL – Up 34.2% in Q1 2025
Poland’s economy did better than expected last year, with a preliminary estimate of GDP growth for the full year at 2.9%, up from the 2.8% consensus forecast. With Q1 2025 is gone now, most forecasters are continuing to suggest that it will move upward to 3.0% or above. This upbeat momentum helped Polish stocks to outperform.
iShares MSCI Spain ETF EWP – Up 22.6%
Although Spain's economy is projected to experience a slight deceleration (from 0.8% recorded in the previous quarter) in growth in Q1 of 2025, the Bank of Spain’s forecast of GDP growth rate in between 0.6% and 0.7% looks steady. Plus, the ECB remains dovish.
KraneShares Hang Seng TECH Index ETF KTEC – Up 21.4%
Chinese tech stocks have gained momentum in Q1 due to the DeepSeek-style craze. The innovation of cheaper-cost AI by startup DeepSeek have rocked the tech world in Q1. China tech stocks benefited a lot from this announcement. Plus, policy environment has been easier in China (read: DeepSeek Buzz Boosts China Tech ETFs).
Global X MSCI Greece ETF GREK – Up 21.1%
Greek stocks are gaining popularity among investors. Greece has steadily recovered from its 2009 debt crisis, with borrowing costs now lower than Italy and France, and banks fully privatized. Greek stocks are undervalued compared with Wall Street and offer higher dividend yields (read: Best-Performing ETF Areas of March).
Global X MSCI Colombia ETF GXG – Up 20.6%
Colombia’s stock market surged on election hopes and a stable dollar. The leftist president Gustavo Petro’s poor governance will likely lead to a conservative, pro-business victory in the next election. Cheap stock prices, with the price-to-earnings ratio hitting a 2002 low, also contributed to the rally. Foreign investments have been notable.
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SPDR S&P 500 ETF (SPY): ETF Research Reports
KraneShares Hang Seng TECH Index ETF (KTEC): ETF Research Reports
iShares MSCI Japan ETF (EWJ): ETF Research Reports
iShares MSCI Emerging Markets ETF (EEM): ETF Research Reports
iShares China Large-Cap ETF (FXI): ETF Research Reports
iShares MSCI Brazil ETF (EWZ): ETF Research Reports
Global X MSCI Colombia ETF (GXG): ETF Research Reports
Vanguard S&P 500 ETF (VOO): ETF Research Reports
Global X MSCI Greece ETF (GREK): ETF Research Reports
iShares India 50 ETF (INDY): ETF Research Reports
iShares MSCI Poland ETF (EPOL): ETF Research Reports
Vanguard FTSE Europe ETF (VGK): ETF Research Reports
iShares MSCI Spain ETF (EWP): ETF Research Reports
iShares Asia 50 ETF (AIA): ETF Research Reports
Vanguard FTSE Developed Markets ETF (VEA): ETF Research Reports
This article originally published on Zacks Investment Research (zacks.com).
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