Investors Encouraged to Explore International Markets for Value Opportunities
- International diversification is becoming appealing after years of U.S. market dominance, according to a strategist from Schroders.
- The strategist emphasizes the importance of looking beyond domestic markets to capture growth opportunities.
- Investors are encouraged to reassess their strategies in light of global economic conditions.
Investors seeking affordable stock investments are advised to look beyond U.S. markets, according to Bob Armstrong, an investment strategist at Schroders. He highlighted that while the S&P 500, along with Europe’s Stoxx 600 and Japan’s Nikkei 225, reached record highs earlier this year, the latter two indices are currently trading at more favorable valuations. The S&P 500's earnings multiple stands at 27, making international markets increasingly appealing for diversification. Armstrong emphasized the benefits of international investments, noting that the past decade favored U.S. markets, but the current landscape suggests a shift. He pointed out that international stocks are demonstrating improved cash efficiency, higher dividends, and record buybacks. Year-to-date, the Nikkei has surged nearly 20%, slightly ahead of the S&P 500's 17% increase, while the Stoxx 600 has risen by approximately 8% in 2024. The strategist also mentioned that Europe’s first-quarter earnings have shown significant growth, marking one of the best performances in years. He explained that both European and Japanese markets are more sensitive to short-term interest rate changes due to a higher prevalence of floating-rate mortgages compared to the U.S. market. For investors looking to capitalize on these trends, Armstrong highlighted specific funds, including the iShares MSCI Japan ETF (EWJ), which is up 11% this year, and the Franklin FTSE United Kingdom ETF (FLGB), which has gained 8%. Both funds offer low expense ratios, making them attractive options for investors.