ETF News

A broader market leadership cycle emerges

If 2025 proved anything for investors, it was that markets can advance even amid relentless uncertainty. Political shifts, geopolitical tensions and economic debates dominated headlines — yet international equities outperformed the U.S. stock market in 2025¹. As Ahmed Farooq, Senior Vice President and Head of Retail ETF Distribution at Franklin Templeton, wrote in his recent outlook: “Markets remained very data dependent and had seemingly blocked a lot of the noise out.”

Canada led major regions in 2025, up more than 30%, supported by commodities strength, while international equities also delivered strong gains². Looking ahead, Farooq believes the opportunity set is widening.

“We foresee broadening opportunities across global capital markets, driven by attractive profit growth outside the United States and global monetary policy easing.”

That idea — broadening leadership — is becoming a central theme for 2026.

After years of U.S. mega-cap dominance, declining correlations between regions, diverging monetary policies and evolving economic drivers are creating a more dispersed global market environment. For investors, this shift raises a familiar but increasingly relevant question: how should portfolios capture international growth without relying on single-country bets?

Why international diversification may matter more now

According to Dina Ting—Head of Global Index Portfolio Management at Franklin Templeton, based in San Mateo, California, United States, global equity markets are entering a structurally different phase.

“We’re seeing dispersion of returns across global equity markets getting wider. We’re also seeing the correlation becoming lower between the U.S. and specific international markets.”

Lower correlations can enhance diversification benefits — particularly when leadership rotates across regions rather than remaining concentrated in a handful of companies.

Ting emphasizes that investors should balance long-term structural positioning with shorter-term market realities:

“It’s always important to combine both the longer-term outlook, as well as a tactical, shorter-term outlook, as you’re building a more resilient portfolio.”

This evolving environment aligns closely with Franklin Templeton’s global outlook themes: broadening opportunities, steepening yield curves and a potentially weaker U.S. dollar, all of which historically support international equities.

Understanding FLUR’s role in a global portfolio

Franklin International Equity Index ETF (FLUR) provides targeted exposure to large- and mid-cap companies across developed markets outside North America, tracking the Solactive GBS Developed Markets ex North America Large & Mid Cap Index.

Key characteristics include:

• Developed-market exposure beyond the U.S. and Canada
• Indexed strategy with diversified sector allocation
• Medium risk classification
• Fund inception date: February 20th, 2019; listed on Cboe Canada
• Approximately $473 million in assets (as of March 18, 2026)

Geographic allocation focuses on developed markets, with Japan at 25.4%, followed by the United Kingdom (13.4%), France (8.8%), Germany (8.2%), and Australia (8.1%). These countries provide diversified exposure across key sectors, ensuring balanced coverage outside North America.

Sector allocations highlight broad economic participation rather than narrow thematic exposure, led by financials (23.9%), industrials (19.5%), and health care (10.7%), alongside technology and consumer sectors.

In practice, this structure allows investors to access regions benefiting from policy divergence, industrial investment cycles and global innovation trends—offering diversification through a single investment.

As Ting explains:

“ETFs allow investors to access markets that individually are really difficult to access… and get the exposure in that specific country or strategy through a precise and low-cost vehicle.”

Global growth drivers are becoming more geographically diverse

A major reason international markets are gaining attention is the evolving nature of innovation itself.

While U.S. firms continue to dominate artificial intelligence development, Ting notes that value creation is increasingly distributed globally across different layers of the AI ecosystem — from semiconductor supply chains in Asia to industrial automation in Japan and infrastructure development elsewhere.

“The next wave of leadership may not be from the places you had expected in the past… there is a chance that growth will come from other places besides just the U.S.”

This broader innovation map reinforces the case for diversified developed-market exposure rather than concentrating solely in U.S. technology stocks.

Countries with strong competitive advantages, high barriers to entry and embedded capital investment — particularly across industrials, manufacturing and infrastructure — may play an increasingly important role in global equity returns.

Building resilience in “an era of bigger government”

Despite constructive market expectations, Franklin Templeton’s outlook also includes a note of caution.

Farooq warns:

“We have entered an era of big and intrusive government, which risks lowering returns and increasing risk across capital markets over the remainder of this decade.”

In such an environment, diversification across regions, currencies and economic models may help mitigate concentration risk.

Broad international ETFs like FLUR can function as a core allocation that complements North American equity exposure, helping investors participate in global growth while reducing reliance on a single market cycle.

ETFs as tools for changing market structure

ETF adoption continues to accelerate globally, driven by accessibility, transparency and flexibility.

Ting highlights how ETFs enable investors to construct portfolios more deliberately:

“You can access that dispersion of returns… and see the interplay given the correlation between the ETFs that you have chosen.”

As correlations fall and regional drivers diverge, this ability to combine exposures efficiently may become increasingly valuable.

Looking ahead: positioning for 2026 and beyond

Entering 2026, the investment landscape appears less concentrated and more regionally differentiated than at any time in recent years.

Global monetary easing, evolving innovation cycles and shifting economic leadership suggest that opportunities may increasingly lie outside traditional market leaders.

For investors seeking broad developed-market exposure aligned with these trends, FLUR represents one way to access international equities within a diversified framework.

Important legal information

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are those of the investment manager, and the comments, opinions, and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, or market.

Commissions, management fees, brokerage fees and expenses may be associated with investments in ETFs. Please read the prospectus and ETF facts before investing. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated.

Franklin Templeton Canada is a business name used by Franklin Templeton Investments Corp.

¹ Source: Macrobond; S&P 500 Total Return 17.88%; MSCI EAFE IMI (Large, Mid & Small Cap) Total Return 32.00%

² S&P/TSX Capped Composite Index