A much-discussed theme since the start of 2025 has been the out-performance of international equities, including developed markets, against the S&P 500 – something some investors have been waiting on for what feels like in an eternity.
With the MSCI EAFE Index sharply outpacing the S&P 500 since the start of the year, market participants may want to investigate unique approaches when it comes to accessing developed market stocks. Enter the WisdomTree Dynamic International Equity Fund (DDWM ), which has returned 15.36% year-to-date and currently resides around 52-week highs.
The $603.7 million DDWM, which debuted in January 2016, tracks international developed market stocks hailing from outside of the U.S. and Canada, resulting in a developed Asia-Pacific/Europe-heavy portfolio. As highlighted by the return mentioned above, DDWM’s geographic mix is paying off for investors in 2025.
DDWM: Right Mix, Right Time
Most ex-US developed market ETFs are heavily tilted toward Japanese and European equities and DDWM is no exception, allocating 20% of its roster to Japanese stocks. While that exposure may appear risky at a time when the U.S. is talking tough against major trade partners, DDWM’s components are picking up the slack.
“Domestic-oriented companies have outperformed exporters, bolstered by wage growth, better governance and targeted capital allocation improvements,” observed Christopher Gannatti, WisdomTree global head of research. “While global investors have long debated the sustainability of Japan’s equity rallies, the current environment is different.”
Part of the reason things are different this time in Japan is because the government and securities regulators there are pushing companies to become more shareholder-friendly by embracing buybacks, dividends and simplified corporate structures.
In Europe – a major contributor to DDWM’s 2025 upside – stocks are awakening from a long period of lagging the S&P 500 with much of credit assigned to increased defense spending. That’s pertinent regarding DDWM because the fund devotes 18.1% of its roster to industrial stocks, making that its second-largest sector exposure, behind financial services. There’s more to the story.
“Core sectors like banking and defense have benefited from a steepening yield curve, curve a surge in defense commitments and recovering earnings power,” added Gannatti. “While gross domestic product (GDP) growth remains subdued, equity markets are reflecting something deeper: stock-level dispersion is unusually high, signaling a return to idiosyncratic alpha.”
He highlighted increased artificial intelligence (AI) adoption, rising defense expenditures, Germany’s fiscal expansion and buoyant mergers and acquisitions activity as catalysts that could continue supporting European stocks through the back half of this year.
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