Some U.S. investors are looking abroad to capture better stock returns in the coming months, betting European and other international stocks hold more enticing valuations after a long period of U.S. dominance.
“Relatively speaking, we have got more money now chasing better opportunities outside the U.S., which was not the case the last several years,” said Martin Schulz, head of the international equity group at Federated Hermes. That period largely coincided with rock-bottom interest rates, a backdrop that favored U.S. stock indexes which are far more heavily weighted in technology shares than stock gauges in Europe. The tech sector amounts to 26% of the S&P 500. The group is only about 7% in the STOXX 600, which is far more heavily geared toward financial and industrial shares.
The firm last month rotated more into international equities as it increased its overall stock exposure, de Longis said. “Every single metric that you can follow from a valuation perspective shows that international stocks are historically cheap versus the U.S.,” said Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management Company.
“As much we can see the merits of lower valuation non-U.S. equity markets, their recent outperformance says investors should be cautious in chasing the recent rally,” Colas said in a note this week.
Easier to wrap your head around moving out of the international yield curve when you are sure the dollar is weakening. The problem is one can quickly get F'd when the resilience of the US economy holds true in H, and the dollar comes back. Best to be early not late to the party