— There really is no place like home and many
investors tend to keep their investment strategies
heavily weighted toward U.S. company stocks. Something
that falls within their comfort zone feels like a safer
investors who insist on staying close to home in today’s
stock market environment could be undermining their odds
for achieving higher returns. While U.S. stocks have
substantially outperformed foreign markets for the last
several years, the tide may be shifting.
markets have been outperforming U.S. stocks by a
substantial margin this year, which is why some advisers
are suggesting that investors venture out more —
partly to avoid concentrating too many eggs in the U.S.
basket and partly to take advantage of the rising trend
in foreign markets.
also are driving a potential shift," said Bernard
Carter, chief investment strategist at Hapanowicz &
Associates Financial Services in Pittsburgh. "If
you look at U.S. markets and U.S. stocks versus foreign
stocks, foreign stocks are a bit cheaper in terms of
their price relative to their sales and relative to
yields, in general, are also quite a bit higher than
dividend yields on U.S. stocks," Carter said.
"These are all items that are contributing to what
could be the beginning of an outperforming period for
said his firm’s global asset allocation for the last
several years had been about 75 percent U.S. stocks and
25 percent foreign stocks. However, Hapanowicz &
Associates has re-allocated its assets to a 65-35
the sake of comparison, the S&P 500 index has risen
a healthy 9.98 percent so far in 2017. The MSCI Europe
index, which measures average returns on stocks in about
15 different European markets, is up by 16.14 percent.
tale of U.S. versus foreign stocks was a much different
story last year. The MSCI Europe gained only 0.15
percent in 2016, while the S&P 500 was up by 11.95
Stone, global chief investment strategist for PNC Bank
in Philadelphia, is bullish on international stocks and
particularly stocks of European companies.
equities offer geographic diversification and open the
opportunity set to invest in firms worldwide,"
Stone said. "Beyond the benefits of diversification
and exposure to many of the world’s leading companies,
there are other potential benefits to investing outside
U.S. borders, including unique opportunities in Asia and
the international equity component, we recommend an
allocation to emerging markets," he said. "It
is reasonable to assume that the U.S. and other
developed markets have similar long-term expected
returns. Much of the difference is likely to come from
currency gains or losses. We remain mindful of the
currency risk inherent in international investing."
said while at times the weaker dollar makes
international investing look more attractive than
underlying fundamentals might dictate, the reverse is
true when the strong dollar punishes U.S. investors’
tactical allocation within the international allocation
focuses on Europe-based and Japan-based holdings,"
Stone said. "Stabilizing recoveries in both Europe
and Japan, relative valuations, improving corporate
earnings and low energy prices are a few of the dynamics
that support strength of equities in the regions."
tables began turning for foreign stocks around July
2016, according to Mark Luschini, who oversees $4
billion in assets as chief investment strategist at
Janney Montgomery Scott, also in Pittsburgh.
said investors became increasingly aware of valuation
disparities between U.S. and foreign stocks.
was really synchronic global acceleration, but our
particular interest is Europe," Luschini said.
"That’s because European economic growth was
faster than the U.S. for the first time since 2008. You
had the back drop of solid economic activity and
attractive stock valuations. And taken together, it
encouraged investors to take their money overseas."