Forget Magnificent 7— Why International Stocks Are Finally A Buy: The End Of The 'Value Trap'
Developed international equities have finally shed their status as a “value trap” and now offer a fundamentally sound alternative to a concentrated U.S. market, riding the wave of the Magnificent 7 tech giants, according to Jurrien Timmer, Director of Global Macro at Fidelity Investments.
Here’s how the Mag 7 tracking MAGS ETF is performing.
Unlocking Shareholder Value
Speaking on a recent episode of the Facts Versus Feelings podcast, Timmer argued that international markets (Europe, Australasia, and the Far East) have found the missing ingredient that previously kept savvy investors away.
For years, low valuations in Europe and Japan were deceptive—cheap for a reason—lacking a fundamental catalyst to drive price appreciation. That dynamic has shifted as foreign companies become “much smarter” about capital allocation.
“The payout ratio for the EAFE index… is now the same as in the US. It’s 75%,” Timmer noted, referring to the combination of dividends and stock buybacks as a share of earnings.
He highlighted that the growth rate of these payouts over the last five years is actually better internationally than in the U.S.
This corporate evolution allows investors to access “equal fundamentals for much better valuation,” with international stocks trading at a price-to-earnings (PE) ratio of roughly 15, compared to a steep 23 in the U.S.
See Also: Is The Market Now Just The Mag-7? Investors Call Tech Concentration A Major Risk
The Concentration Risk
The call to diversify comes as U.S. market concentration reaches historic, and potentially precarious, levels.
The Magnificent 7 stocks alone account for approximately 36% of the S&P 500. Timmer warned that while this concentration has driven recent returns, it creates significant downside risk if the AI narrative cools or valuations become detached from reality.
The ‘Barbell’ Solution
While some investors look to U.S. small caps for diversification, Timmer advises looking overseas instead, noting that small-cap margins remain compressed compared to their larger counterparts.
Instead, he advocates for a “barbell” portfolio approach. By balancing high-growth U.S. tech exposure with cheaper, shareholder-friendly international stocks, investors can potentially boost returns while hedging against the volatility of a top-heavy domestic market.
Here’s how Magnificent 7 stocks have performed in 2025:
| Stocks | YTD Performance | One Year Performance |
| Nvidia Corporation (NASDAQ:NVDA) | 30.33% | 33.19% |
| Apple Inc. (NASDAQ:AAPL) | 13.82% | 18.14% |
| Microsoft Corp. (NASDAQ:MSFT) | 15.99% | 14.78% |
| Amazon.com Inc. (NASDAQ:AMZN) | 4.06% | 11.38% |
| Alphabet Inc. Class A (NASDAQ:GOOGL) | 68.90% | 89.06% |
| Alphabet Inc. Class C (NASDAQ:GOOG) | 68.01% | 87.50% |
| Meta Platforms Inc. (NASDAQ:META) | 5.74% | 11.32% |
| Tesla Inc. (NASDAQ:TSLA) | 12.47% | 28.14% |
| SPDR S&P 500 ETF Trust (NYSE:SPY) | 16.26% | 13.50% |
| Invesco QQQ Trust ETF (NASDAQ:QQQ) | 20.39% | 21.57% |
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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