A Dollar in Decline Supports Case for International Equities

A declining dollar continues to strengthen the investment case for international equities. However, before investors dive into international equities exposure, it’s imperative to examine the options presented to them — namely passive versus active fund options.

The investor appeal for international equities continues to strengthen following the first rate cut of 2025. The expectation is that the Federal Reserve will continue to follow a path toward easing, which should, in turn, prop up the local currencies of countries abroad. Because oftentimes a country’s market strength is tied to the strength of its native currency versus the U.S. dollar, the Fed’s easing should smoothen the pathway for upside in international equities.

The strength abroad is visually apparent in the performance disparity between the MSCI World Ex USA and the ICE US Dollar Index. Juxtaposing the performances of both indexes in a year-to-date time frame immediately shows the strength of the MSCI index. Ensuing interest rate cuts could widen the performance gap between the two indices even further. This is a microcosm of the broader trend of de-dollarization in which more and more countries are turning away from the dollar as the world’s reserve currency.

^MSW data by YCharts

In addition to the macroeconomic effects of the dollar, international equities carry their own nuanced risks investors must take into consideration. These risks include political and economic risk associated with specific countries. Furthermore, tariffs in the current market environment only add to the already-complex nature of international stocks. Given these factors, passive funds are typically tied to an index, which doesn’t allow for customization of its holdings when volatility strikes. This is where an actively managed fund can shine in an international market environment that can be prone to various systematic and idiosyncratic risks.

Active Flexibility

Investors looking to get exposure to international equities should consider using an active fund as opposed to one tethered to an index. Given the complexities associated with international equities, investors should strongly consider active management to navigate these nuanced markets. The flexibility allows portfolio managers to tailor the holdings to suit the various nuances associated with international equities, which can vary from country to country.

One fund that should be on the consideration list is the Thornburg International Equity ETF (TXUE). The fund leverages the expertise and experience of Thornburg’s investment management team who can expertly navigate international markets.



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