Every time the US stock market gets heavier, the Wall Street marketing machine kicks into high gear. The cycle returns to a favorite narrative: geographic diversification.
Retail investors are urged to ditch their concentrated domestic stocks and buy single-country ETFs to capture untapped and uncorrelated growth cycles abroad.
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There is no crystal ball when it comes to investing. At least there shouldn’t be, and we should run away from anyone who promises to have one. But up to five months into 2026, the global scoreboard shows some surprising performance numbers.
The question I ask myself about any ETF or market segment that is not tied to one of the benchmark indices is: am I buying true diversification or am I simply taking advantage of the upward movements of the S&P 500 Index ($SPX) and the Nasdaq-100 Index ($IUXX) in a different package? That is, a different ticker.
So before we trade our SPDR S&P 500 ETF Trust (SPY) or Invesco QQQ Trust (QQQ) exposure for foreign tickers, we need to understand the realities driving these returns in non-U.S. stocks, particularly when viewed by country rather than in an overall global or international ETF.
Most of the time, a single country ETF is not actually a bet on a country: it is simply an expensive and highly concentrated bet on a single sector or industry in disguise. That’s because while the United States has a little bit of everything and plenty of tech stocks, national stock markets in the rest of the world tend to be narrow in comparison.
That doesn’t mean I ignore them. But it does mean that I use them as substitutes for whatever their equivalent is in the US market. I track dozens of single-country, regional and specialized international ETFs. Based on performance so far this year until last Friday, May 29, these are the leaders. I’ll talk about them and then move on to the stragglers.
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A single country’s stock market landscape this year is defined by two massive technology-driven spikes and a spectacular regulatory crisis.
The absolute king of global equities this year is South Korea (EWY). The index has more than doubled in 2026, driven by a violent multi-month short squeeze and unprecedented global demand for high-bandwidth memory chips. Taiwan (EWT) is up 67%. Following the same hardware wave, Taiwan’s stock index has soared as hyperscalers continue to stockpile advanced chip architectures.
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The worst stock market disaster on the planet this year belongs to Indonesia (IDX). It’s down more than a third from its 2025 year-end value. And as with most country ETFs, there’s often not much difference between the brands. EIDO is also dedicated to Indonesian stocks, and has improved just 2.5% in the first five months of this year.
The country’s stock market collapsed following an official warning from index provider MSCI that the country is at risk of a downgrade from “Emerging Market” to “Frontier Market” due to structural transparency issues and severe stock concentration. Frontier markets are the smallest markets that are in the initial stages.
The portfolio allocation veteran in me can’t help but think that South Korean markets were a direct beneficiary of that downgrade of its Indonesian neighbor. The assets sold had to go somewhere, and much of the wealth invested in Indonesia is part of a broader regional portfolio.
India (INDY) has also lagged behind. After years of trading at huge valuation premiums, its stock market has entered a sharp correction cycle as institutional liquidity flows out of expensive emerging markets.
Are Domestic ETFs Better Than US Sectors?
Now to that difficult question I mentioned earlier. Look closely at the list of winners and losers. If you buy the iShares MSCI South Korea ETF (EWY) or the iShares MSCI Taiwan ETF (EWT) because you want exposure to sovereign macroeconomics, you are kidding yourself.
Single-country ETFs are mostly capitalization-weighted index models. Because foreign stock markets are rarely as diversified as those in the United States, their domestic indices are completely monopolized by one or two corporate giants.
When you buy EWT, you are not investing in a vibrant, multi-sector East Asian economy. Taiwan Semiconductor (TSM) single-handedly dictates the overwhelming majority of that index’s daily price movement, as it represents 20% of the ETF’s asset base. The same goes for purchasing EWY to access South Korea. Actually, it’s more of a way to buy a combined Samsung Electronics and SK Hynix brick.
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If the goal is to make money in the chip sector, buying EWY or EWT is no better or safer than simply owning a tracker dedicated to the US industry like the VanEck Semiconductor ETF (SMH). In fact, with country ETFs, foreign currency risk is assumed and significantly higher net expense ratios are paid to express a very similar underlying technology bullish thesis.
This doesn’t mean that all single-country ETFs are difficult to beat. You are welcome. It simply means that we need to know what we own and ask ourselves the question I ask myself every time: is this really different?
Rob Isbitts created the Roar Scorebased on his more than 40 years of experience in technical analysis. ROAR helps DIY investors manage risk and build their own portfolios. To view Rob’s written research, see ETFYourself.com.
On the date of publication, Rob Isbitts had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
