The iShares Core MSCI EAFE ETF invests in developed markets outside the U.S. and Canada, principally Japan, the United Kingdom, France and Germany. IEFA has outperformed the S&P 500 so far in 2025, benefiting from low starting valuations and a weak U.S. dollar. Looking ahead to 2026, I estimate that GDP growth in countries where IEFA invests should accelerate to 1.23%, up from 1.01% in 2025.
One of the top-of-mind themes for advisors and investors in 2025 has been the resurgence of international equities. As of October 10, the widely followed MSCI EAFE Index was higher by 24.1% since the start of the year.
The iShares Core MSCI EAFE ETF invests in developed market equities outside the United States and Canada. I estimate countries in which IEFA invests will only deliver 1% GDP growth in 2025, 0.4% weaker than the United States. Even so, compared with the SPY, IEFA offers a more attractive earnings and dividend yield, more than offsetting weaker future growth.
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The fund operates as an investment vehicle, focusing primarily on capturing the equity market performance across various geographies including Europe, Australasia, and the Far East. It employs a strategy that involves allocating at least 80% of its assets towards securities that are included in its underlying index or those that bear economic characteristics significantly identical to the index components. The emphasis is on diversifying investments across large-, mid-, and small-capitalization companies, aiming to offer investors broad exposure to global equity markets beyond domestic opportunities.
The service encompasses thorough market analysis to identify equities that not only are part of the underlying index but also possess qualities likely to yield substantial economic benefits identical to those index components. This strategy enables the fund to tap into diverse market dynamics, capitalizing on global economic variations and opportunities.