T. Rowe Price is making the case for international equities. The Magnificent Seven now account for 32% of the S&P 500’s market value, more than double their 14% share in 2019, according to a new report from the firm.
Key Takeaways:
- The Magnificent Seven now make up 32% of the S&P 500, more than double their 14% share in 2019.
- Developed international stocks traded at a 23% forward P/E discount to the S&P 500, as of March 31.
- TACN launched in December 2025 with a 0% expense ratio and has returned 8.48% year to date.
For investors weighted toward U.S. stocks, T. Rowe Price argues that international equities deserve a closer look. The firm points to improving earnings, lower valuations, and broader exposure that could strengthen long-term returns.
That concentration carries risk. A handful of mega-cap names drive so much of the S&P 500’s performance that investors may hold more single-sector exposure than they realize, the report notes.
International fundamentals are improving, with earnings per share growth in developed markets reaching 5.2% annually after the pandemic. That is up from 1.7% before it, according to T. Rowe Price analysis using data from FactSet.
Yet international stocks remain cheaper than their U.S. counterparts. As of March 31, international developed markets traded at a 23% forward price-to-earnings discount to the S&P 500. That means investors pay less for each dollar of expected earnings, according to the report.
Where International Opportunity Is Growing
The global opportunity set has also expanded, with listed non-U.S. companies growing 38% since 1999. Over that same period, listed U.S. companies contracted 44%, according to the World Bank Group.
Meanwhile, Japan’s corporate governance reforms are opening new doors for investors. Europe’s rising defense and infrastructure spending is creating similar openings. A manufacturing build-out across parts of Asia adds another dimension, according to T. Rowe Price.
Artificial intelligence (AI) is also going global. What began in U.S. cloud and software infrastructure is now spreading to industrial automation in Europe and semiconductor production in Asia. Digital platforms in emerging markets are also capturing AI opportunities, the report noted.
Those trends strengthen the case for active management. T. Rowe Price offers one avenue through the T. Rowe Price Active Core International Equity ETF (TACN). The fund launched in December 2025 and uses quantitative models and fundamental research. Its portfolio holds 400 to 500 large- and mid-cap non-U.S. stocks, according to T. Rowe Price.
TACN carries a 0% expense ratio from a fee waiver in effect from January 30, 2027, and only 0.14% thereafter. TACN has already returned 8.48% year to date, according to ETF Database. Its largest holding is ASML Holding (ASML) at 3.06% of assets. AstraZeneca (AZN) follows at 1.69%, with Shell (SHEL) at 1.44%.
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