Key Updates
SCHF has advanced 2.03% since the December 24 report to $24.62, establishing a new multi-year high and extending its exceptional 2025 performance. The ETF is now up 2.43% YTD in early 2026, building on the previous year's 30%+ gain. This update reflects continued momentum in international equity markets, with institutional investors maintaining overweight positions in non-U.S. stocks amid elevated U.S. valuations. The investment thesis for international diversification remains intact, supported by strong performance data showing international markets outperforming U.S. equities by significant margins through year-end 2025.
Current Trend
SCHF demonstrates strong positive momentum across all timeframes: +1.09% (1-day), +1.71% (5-day), +1.80% (1-month), +11.02% (6-month), and +2.43% YTD. The ETF has broken through the previous $24.19 resistance level established in December and now trades at $24.62, marking a new multi-year high. The consistent upward trajectory across short, medium, and long-term periods indicates robust investor demand for international equity exposure. The 11.02% gain over six months reflects the sustained outperformance of international markets relative to U.S. equities that characterized late 2025.
Investment Thesis
The core thesis centers on international equity outperformance driven by valuation disparities and market broadening beyond U.S. mega-cap technology stocks. International stocks delivered approximately 33% returns in 2025 compared to the S&P 500's 18%, with most major international markets beating U.S. equities even excluding currency effects, according to Goldman Sachs analysis. The valuation gap between U.S. and international stocks narrowed by nearly one-third during 2025, though U.S. stocks remain at a premium more than twice the historical average. With U.S. equities trading at 23 times forward earnings versus a historical average of 18 times, and the Buffett Indicator at 208% (significantly above the 100% fair value benchmark), international markets offer more attractive entry points. The thesis is reinforced by institutional positioning, with JPMorgan moving to overweight positions in international markets, particularly China, citing economic recovery and competitive AI developments.
Thesis Status
The investment thesis is performing exceptionally well and continues to strengthen. SCHF's 2.43% YTD gain in early 2026 follows the 30%+ performance in 2025, validating the international diversification strategy. The thesis predicted that elevated U.S. valuations and market concentration would drive capital allocation toward international equities, which has materialized as forecasted. Non-U.S. markets posted a median return of 29% through November 2025 compared to the S&P 500's 17%, with Asian markets leading performance. The structural drivers remain intact: U.S. valuation concerns persist, policy uncertainty under the Trump administration continues, and international markets offer exposure to competitive developments in AI and technology outside the concentrated U.S. Magnificent 7 stocks. The shift from U.S. to international equities appears to be a durable trend rather than a temporary rotation, as evidenced by institutional reallocation and industry expectations that small-cap and international stocks will attract increased investor attention in 2026.
Key Drivers
International equity outperformance is driven by multiple fundamental factors. Valuation compression between U.S. and international markets continues, with the price-earnings-growth ratio differential decreasing significantly in 2025, though U.S. stocks maintain elevated premiums. Asian markets demonstrate particular strength, with MSCI China and Hong Kong's Hang Seng both up approximately 28-29%, supported by competitive AI developments like China's DeepSeek. Currency tailwinds provided additional support, with the U.S. dollar declining 9% against a basket of currencies, though Goldman Sachs analysis confirms most international markets would have beaten the S&P 500 even without currency benefits. Institutional capital allocation shifted decisively toward international exposure, with Warren Buffett's Berkshire Hathaway being a net seller of equities for 12 consecutive quarters while holding a record $381 billion in cash. The ETF industry's 30%+ asset growth in 2025 was driven by retail investors, and this momentum is expected to continue with increased focus on international equities. Product innovation supports accessibility, with State Street servicing more than 3,000 ETFs with $7.44 trillion in assets across the $18.5 trillion global ETF marketplace.
Technical Analysis
SCHF exhibits strong technical momentum, trading at $24.62 after breaking through the $24.19 resistance level that capped prices in December. The ETF has established a clear uptrend with higher highs and higher lows across all measured timeframes. The previous resistance at $24.19 now serves as immediate support, with additional support at the $24.14 level from late December. The consistent positive performance across 1-day (+1.09%), 5-day (+1.71%), 1-month (+1.80%), and 6-month (+11.02%) periods indicates sustained buying pressure without signs of exhaustion. Volume patterns suggest institutional accumulation rather than retail speculation. The 11.02% six-month gain demonstrates strong intermediate-term momentum, while the 2.43% YTD performance in early January suggests continuation of the trend established in 2025. No overbought conditions or negative divergences are evident in the price action. The technical setup remains constructive with room for further appreciation toward the psychological $25.00 level.
Bull Case
- International stocks delivered 33% returns in 2025 versus the S&P 500's 18%, with Goldman Sachs confirming most major international markets would have beaten U.S. equities even without currency tailwinds, driven by sharp valuation increases and strong local market performance including Japan's 25% return and South Korea's 100% gain.
- U.S. stocks trade at elevated valuations of 23 times forward earnings versus a historical average of 18 times, with the Magnificent 7 comprising over one-third of the S&P 500, creating concentration risk and driving institutional investors like JPMorgan to overweight positions in international markets for diversification and value.
- The valuation gap between U.S. and international stocks narrowed by nearly one-third during 2025, with the price-earnings-growth ratio differential decreasing significantly, suggesting continued mean reversion potential as international equities remain attractively priced relative to historical norms and U.S. counterparts.
- Asian markets demonstrate exceptional momentum with MSCI China and Hong Kong's Hang Seng both up approximately 28-29%, supported by competitive AI developments like DeepSeek and economic recovery, attracting major institutional capital as investors gain exposure to technology innovation outside U.S. markets.
- Industry analysts project continued international equity strength, with small-cap and international stocks expected to attract increased investor attention in 2026 as large U.S. technology companies face pressure to demonstrate AI infrastructure investments translate into meaningful profit growth, supporting rotation into international exposure.
Bear Case
- Warren Buffett's Berkshire Hathaway has been a net seller of equities for 12 consecutive quarters, holding a record $381 billion in cash representing over one-third of its market capitalization, suggesting one of history's most successful investors sees limited opportunity in current equity markets globally.
- The Buffett Indicator comparing U.S. market capitalization to GDP currently stands at 208%, significantly above the 100% level indicating fair value, and the S&P 500 Shiller CAPE ratio signals elevated valuations, which could trigger broader global equity correction if U.S. markets decline given interconnected global financial systems.
- Policy uncertainty under the Trump administration including potential tariff impacts creates risks for international companies with significant U.S. export exposure, particularly affecting developed market equities in Europe and Asia that depend on U.S. consumer demand and trade relationships.
- Despite 2025 outperformance, U.S. stocks remain at a valuation premium more than twice the historical average relative to international equities, suggesting the valuation gap may not close further if U.S. companies continue to demonstrate superior earnings growth and return on equity compared to international peers.
- The U.S. dollar's 9% decline in 2025 contributed significantly to international equity returns for dollar-based investors, and any reversal in dollar weakness could eliminate currency tailwinds, reducing reported returns for U.S. investors holding international equities through ETFs like SCHF.