For over a decade, making the case for international value investing felt like shouting into the wind. Why swap European banks and mining stocks for the kind of returns that American tech was spinning off quarter after quarter? The US exceptionalism story seemed bulletproof. But a new research paper out of MFS Investment Management suggests that investors who bought into that story may now be on the wrong side of a major shift — one with some striking historical echoes.
The paper, titled The Forgotten Asset Class1, published in March 2026 and authored by Portfolio Managers Steven R. Gorham, CFA, and David S. Shindler, along with Institutional Portfolio Manager Nicholas J. Paul, CFA, isn't just calling international value cheap. It's arguing the asset class has been fundamentally misread.
So why was it so easy to forget? The numbers make that pretty clear. Over the 15 years through December 2025, the S&P 500 posted an annualized return of 14.1%. Its tech sector — now a third of the entire index — compounded at 20.1%. Meanwhile, the MSCI EAFE Value Index, heavy on banks, oil majors, and miners, limped along at 6.4% annualized. Morningstar data drives the point home: US large-cap funds dwarf their international peers in total assets, with Foreign Large Value barely a blip on the chart.
The MFS team isn't treating that gap as a permanent feature of markets, though. They see it as a setup.
"Investors appear to have lost sight of the fact," they write, "that there have been several extended periods of time during which international value stocks were in favor." Their key reference point is January 2001 — right at the dot-com bubble's edge. Back then, the US dollar was up 40%, the S&P 500 had outrun EAFE Value by 7.2% a year for a decade, Treasuries yielded 5.25%, global inflation sat at 3.4%, and US stocks traded at 24x forward earnings. "Sounds familiar, right?" the authors ask — then flip the reveal: "No, we're not referring to today, but rather to January of 2001. We all know what happened next."
Fast-forward to year-end 2025: the dollar is up 26%, the S&P 500 has outperformed EAFE Value by 9.7% annualized over 15 years, the 10-year Treasury yields 4.1%, inflation is at 3.0%, and US stocks trade at 22x forward earnings. Not identical — but close enough to make you sit up.
The team is careful not to oversell the analogy. Today's tech giants aren't Pets.com. "The mega-cap technology companies of today benefiting from investor exuberance around generative AI," they write, "are in most cases high-quality businesses and not comparable to the Pets.com or the eToys of the dot-com era." But the caveat is real: "if earnings or profit margins, subject to unprecedented capex spending, for these concentrated areas of the market don't live up to the lofty expectations embedded in their stock prices, and if multiples de-rate, the relative value opportunity for international stocks, and international value stocks in particular, could be tremendous."
History backs that up. After the dot-com bust — from January 2000 through December 2007 — the MSCI EAFE Value Index returned 8.2% a year. That was nearly five times what the S&P 500 managed (1.7%), while US tech actually shed 7.7% annually. And the kicker? That international value return "was driven entirely by earnings and dividends" — not a multiple re-rating story, just real business performance.
The two indices don't even look like they're playing the same game. The S&P 500 runs a 34.4% weight in Information Technology. EAFE Value? Just 2.4%. Instead, you get 38.5% in Financials, nearly 10% each in Industrials and Consumer Staples, and meaningful exposure to Materials and Energy. "The two could not be more different," the team writes simply — the EAFE Value offering "cyclical and shorter-duration sectors" that make for "a much more diversified universe when compared to the tech-laden S&P 500."
That diversification case has teeth in the correlation data, too. EAFE Value's three-year correlation to the S&P 500 stands at just 0.54 — well below EAFE core at 0.69 and EAFE Growth at 0.76. And that gap is widening. "That level of diversification, when looked at correlatively," the authors note, "is at the widest level we've witnessed historically, and in fact has increased in recent years."
On valuation, the picture is equally stark. EAFE Value has traded more than one standard deviation below its historical forward P/E relative to the S&P 500 — a spread that's been deepening since 2016 and is now nudging two standard deviations. That kind of extreme rarely sustains indefinitely.
What might shift the dynamic? The MFS team points to a wave of structural themes with genuinely global reach: "increased capex (versus just technology-focused opex), infrastructure upgrades, energy and the energy transition, defense and national security, and the reshoring and localization of supply chains." Tech won't own all of this. "While the US dominates the technology landscape globally," they write, "it would be naïve to assume that all the best companies in the world across a wide subset of sectors and industries reside in a single region or country."
International banks get a special mention. Years of tough regulation and squeezed margins have left them leaner and cheaper than their US counterparts. The team sees them as "now dramatically de-risked and de-levered, consolidated, and still trading at what we believe in many cases to be attractive valuations" — a quiet story that persistent inflation could make very loud.
The conclusion lands without fanfare. "While no two periods are identical," Gorham and his co-authors write, "there are several similarities between today and the eight-year period that began in the early 2000s when international value stocks strongly outperformed their US counterparts." The list — inflation, rates, the dollar, valuation spreads, US index concentration — is long enough to matter. "The similarities are striking."
This isn't a bold prediction. It's a sober, data-grounded argument that a decade of neglect has created genuine opportunity — and that waiting for everyone else to see it first is its own kind of risk.
Footnote:
1 Gorham, Steven R., David S. Shindler, and Nicholas J. Paul. "International Large-Cap Value: The Forgotten Asset Class." Equity Insights, MFS Investment Management, Mar. 2026.
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