Investors Turn to International ETFs as US Stocks Stumble in February

Turbulent markets didn’t scare investors away from stock exchange-traded funds in February. While they saw milder growth than their bond counterparts, stock ETFs hauled in a fresh $66 billion on the month. US and international equity ETFs chugged along with solid inflows, though their sector-specific peers shed more assets than they gained.

This article examines last month’s stock ETF performance and flows. Bond ETF performance and flows sit in a separate article, which also details flows into nontraditional-stock ETFs, crypto ETFs, and the top ETF providers.

Stock ETF Performance: A Rotation Takes Shape

Vanguard Total World Stock ETF VT slid 0.4% in February, a quiet month that belied significant churn beneath the surface. Many of the market’s most popular trades over the past two years—and certainly following the US election—started to unwind last month, ceding the limelight to market segments that had fallen behind.

Foreign-stock ETFs Outperform Thanks to a Rally in Chinese Stocks

Foreign-stock ETFs enjoyed February gains, while most of their US counterparts finished in the red. Vanguard Total International Stock ETF VXUS advanced 1.9% in February, while Vanguard Total Stock Market ETF VTI

lost roughly the same amount, an inversion after the foreign-stock portfolio trailed its US twin by more than 15 percentage points over the prior 12 months. Chinese stocks represent about 8% of VXUS but contributed the most to its positive returns; the Morningstar China Index rallied 11.3% after President Xi Jinping publicly embraced Chinese technology companies. In Europe, Morningstar indexes that track the UK, Germany, France, and Switzerland stock markets all climbed between 2% and 4%.

US Stock ETFs Hit the Skids as Big Tech Takes a Tumble

US stocks, whose tremendous gains powered VT and other global funds for years, hit a snag in February. A cocktail of sticky inflation, low consumer confidence, and a murky trade outlook weighed on returns. VTI has trounced VXUS in recent years but trails its foreign counterpart by 4 percentage points through the first two months of 2025.

Many of the US market’s biggest companies stumbled in February. Roundhill Magnificent Seven ETF MAGS lost 8%, marred by drawdowns from Tesla TSLA (27.6%), Alphabet GOOGL (15.6%), and Amazon.com AMZN (10.7%). Technology Select Sector SPDR ETF XLK shed 2.3% in its worst month since last July. The technology darlings that led last year’s market took a backseat as steadier US companies fared much better. Invesco S&P 500 Low Volatility ETF SPLV, which favors stable utilities, financials, and consumer staples firms, notched a 4.6% gain in February.

The February trend reversal showed up in value/growth performance as well. Vanguard Value ETF VTV

returned 0.8% thanks to many of the same firms that powered SPLV, while Vanguard Growth ETF VUG

sank 3%. Growth stocks have soared to sky-high valuations in recent years, while value companies stayed more grounded. February seemed to bring the highflyers back closer to Earth.

Large-cap stocks held up better than small-cap stocks in February, one trend that February didn’t disrupt. IShares Core S&P Small-Cap ETF IJR fell 5.6%, trailing iShares Core S&P 500 ETF IVV by about 4.5 percentage points on the month and more than 12 percentage points over the past 12 months. Smaller companies tend to be more economically sensitive and probably felt the inflation print and uncertainty more acutely. Their February woes group them with the US dollar, Bitcoin, and Tesla—investments that soared following November’s presidential election but gave most of those gains back by March.

SPY Versus VOO: S&P 500 ETFs Battle for First Place

Vanguard S&P 500 ETF VOO dethroned SPDR S&P 500 Trust ETF SPY as the world’s largest ETF when its assets reached nearly $624 billion on Feb. 18, 2025. The celebration was short-lived, as SPY reclaimed its number-one spot the next day and kept it through the end of February. Expect VOO to soon retake the crown and keep it for good, though. Its lower fees have made it investors’ preferred S&P 500 tracker, soaking up roughly $226 billion over the past three years compared SPY’s $68 billion. The gradual shift toward VOO made the Feb. 18 handoff more of a culmination than an abrupt pivot, something that will make it hard to knock off the top again.

ETFs with the Largest February In- and Outflows

US Equity ETFs See Routine Inflows

The US equity cohort pulled in $48 billion in February, a solid but routine sum for the largest US Morningstar Category group. Large-blend funds collected about $32 billion of that money; the large-growth and large-value categories split the remainder with $8 billion-$9 billion of inflows apiece. Small-blend was the lone US equity category in outflows. It shed about $3 billion on the month, all of which rushed out of iShares Russell 2000 ETF IWM. That $67 billion fund often serves as a proxy for small caps in the trading community, leaving it susceptible to “hot money” and volatile month-to-month flows. So it’s hard to conclude that investors washed their hands of small caps until a broader exodus unfolds.

International ETFs Notch Solid Inflows

International stock ETFs gathered nearly $13 billion in a strong response to their quiet January. Foreign large-blend funds claimed about half of those flows, a fitting ratio for the category that represents about half the group’s assets. Smaller categories chimed in, too. Diversified emerging-markets funds absorbed $3.5 billion in their best month since January 2023. Europe stock and China region funds tacked on $2.3 billion and $1.3 billion, respectively. That represented the Europe stock category’s best flows in two years and the China region’s first month of inflows since last October. Both underlying markets’ stellar performance probably explains their resurgence.

February Flows Across Morningstar US Category Groups

Sector ETFs Don’t Feel the Love in February

One segment of the stock ETF world that inflows didn’t reach was sector-equity funds, which lost roughly $3 billion on the month.

Flows into this cohort tend to wax or wane with the market; most of its money sits in sensitive sector ETFs like those tied to technology or financials. Consumer cyclical ETFs led the February outflows as more than $1 billion left the door. The hotter-than-expected inflation print may have played a role. North of $500 million streamed out of homebuilding ETFs, whose holdings are highly sensitive to input price levels.

Low Risk, No Reward: Investors Pull Money Out of Risk-Oriented ETFs

Stock ETFs designed to cut back on risk mostly did their job in February. Twenty-five of 29 ETFs in the risk-oriented strategic-beta group outperformed their category index on the month. Investors didn’t reward them, though, pulling roughly $1 billion from this group on the month. Such has been the trend. Risk-oriented ETFs suffered outflows in all but one month since the start of 2023, losing more than $30 billion over that span. The rise of rival lower-risk offerings like defined-outcome or covered-call ETFs has seemingly come at the expense of their low-volatility predecessors, which now face outflows even when the market backdrop breaks in their favor.