Vanguard Expects Foreign Stocks to Beat the US Over the Next Decade

US markets were closed Monday for Labor Day, so there was no trading session to report. Wall Street reopens today.

The quick scan: A long weekend means no fresh close to unpack, and no numbers to read too much into. Trading resumes today, with the market picking up where Friday left off. Today's article steps back from the daily noise to ask a bigger question: how much of your portfolio quietly rides on a single country, and whether that is something you chose or something that simply accumulated.

How Much of Your Retirement Is Riding on a Single Country?

The scoop: Quick question, and answer it before you reach for the statement. Of all the money you hold in shares, roughly how much of it sits in companies from a single country?

For most of us the answer is "far more than I ever decided to." If you own a typical US index fund, or a retirement account built around one, the odds are that the overwhelming majority of your equity sits in American companies. That felt entirely reasonable for the past fifteen years, because American companies did much of the heavy lifting for the whole world's returns. The question Vanguard raised in its 2026 economic and market outlook is whether the next fifteen will be as kind.

The map most of us never look at

Here is the number that tends to stop people mid-sip. The United States makes up a little under two-thirds of the world's stock market by value. Everything else – Europe, Japan, the whole of emerging Asia, Australia, Canada, the lot – shares the remaining third or so between them. Yet the portfolios of ordinary investors are routinely tilted well past that two-thirds mark, sometimes all the way to ninety or a hundred percent at home. Economists have a polite name for this: home-country bias. In plain terms, we buy what feels familiar, and nothing feels more familiar than the companies whose products sit on our own kitchen counters.

Bias is the right word, because it describes a lean we never consciously chose. It accumulated quietly, one default fund and one familiar name at a time, until the map of our money looked nothing like the map of the world.

What Vanguard actually said

Vanguard's outlook is a set of ten-year projections, and two figures sit at the centre of it. Over the coming decade the firm's model points to roughly 4 to 5 percent a year from US shares, against something closer to 5 to 7 percent a year from shares listed outside the US. Read those as scenarios produced by a model, not as a promise anyone is making you.

The reason behind the gap is almost dull in its simplicity. It comes down to starting price. One long-running gauge of how expensive the American market has become – a price-to-earnings measure that smooths company earnings over ten years to strip out the noise – sat near 40 in the middle of 2026. Its long-run average is less than half that. Markets outside the US start from cheaper ground, and cheaper starting points have, historically, left more room to climb.

Why the starting price matters so much

This runs against instinct. We tend to assume the best investment is the one that has been winning, because a long streak feels like proof of quality. But the price you pay sets the return you can reasonably hope for, and a wonderful company bought at a punishing price can still turn out to be a mediocre investment. Every extra dollar you hand over today for a slice of future earnings is a dollar no longer available to compound for you tomorrow.

None of that says American business is in trouble. It says the American market is priced for a great deal to keep going right, while much of the rest of the world is priced for rather less. When expectations are already sky-high, there is further to fall if reality merely turns out fine rather than spectacular.

Vanguard is not out on a limb here

It would be easy to wave all this away as one large fund manager talking its own book. What makes it harder to dismiss is the company these numbers keep. Morningstar's panel of experts reached broadly the same conclusion for 2026, by their own route. And Robert Shiller, the economist whose valuation work sits behind that expensive-market reading, has floated a US return closer to 1.5 percent a year in nominal terms over the coming decade – a sobering figure, and one that makes Vanguard's projection look almost cheerful by comparison.

When several careful, independent observers reach the same doorstep by different streets, it is worth slowing down before you walk past it.

What this is not

Make no mistake about what a ten-year forecast can and cannot do. It cannot tell you what happens next year. Forecasters have confidently called the end of American dominance before, and the market spent the following decade making them look foolish. Models are humble things dressed in confident clothing.

So this is not a signal to sell your home market in a hurry, nor a nudge to go chasing whatever looks cheap this quarter. It is quieter than that. It is an invitation to pull out the map, notice how much of your future sits on one small patch of it, and ask whether that concentration is something you chose or something that accumulated while you were busy living your life.

The comfort we are really paying for

Home-country bias survives because it is comfortable. The familiar feels safe, and after a long run of home-market wins it also feels vindicated. But comfort and diversification rarely point the same way. The purpose of spreading your money is to own things that do not all rise and fall in unison, and that means holding some assets that feel a little foreign and, for long stretches, a little disappointing to watch.

For those of us at or near retirement, the stakes are simply higher. A thirty-year-old who is badly over-concentrated has decades to recover from a rough ten years. Someone already drawing on their savings does not enjoy the same luxury of time. That is not a reason to panic. It is a reason to make sure the shape of the portfolio is deliberate rather than accidental – and, at long last, to know the true answer to that opening question.

Actionable takeaways for L-Plate Retirees:

• Find out your real home-country weighting before you touch anything. Most people are startled by the answer. Add up your equity holdings and work out what share sits in one country. You cannot judge whether a concentration is sensible until you know it exists.

• Treat a ten-year forecast as a lean, not a lever. Projections describe the weather system, not tomorrow's weather. Let them gently inform how you tilt over years, not what you trade this week.

• Let new money do the quiet work. Rather than dramatically selling what has done well, many people find it calmer to steer future contributions toward the parts of the world they are light on. Diversifying gradually, with fresh money, spares you the wrench of dismantling winners and the tax and timing headaches that come with it.

• Separate the winner from the winning price. A great company and a great investment are not the same thing, because the price you pay decides how much of the greatness is left for you. When something has run hard, ask what you are paying for each dollar of earnings, not how good the story sounds.

• Match the deliberateness to your timeline. The closer you are to relying on the money, the more it matters that its shape is chosen rather than inherited by accident. Concentration you consciously accept is a strategy. Concentration you never noticed is just exposure in a comfortable disguise.

• Decide the mix once, then resist the urge to fiddle. The hardest part of any sensible plan is leaving it alone when the headlines get loud. Set a mix you can defend, and check it perhaps once a year rather than once a day. Constant tinkering tends to cost far more than it ever earns.

Your Turn:
If you added it up right now, what share of your investments would you find sitting in a single country – and is that a number you chose, or one that simply accumulated? 
Could you comfortably hold an investment that felt unfamiliar and quietly underperformed your home market for years, knowing that discomfort is often the price of genuine diversification? 
When you picture the next decade of your retirement, is your portfolio's shape the result of a decision you made on purpose, or of a hundred small defaults you never quite examined?

👉 Hit reply and share your thoughts – your answers could inspire fellow readers in future issues.

If this issue helped you see that a portfolio quietly overweight one country is a comfort you drifted into rather than chose, consider supporting L-Plate Retiree on Ko-fi. Your support keeps these plain-English reality checks on the money-and-mind stuff coming.