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Is it Time for International Markets to Shine?
Good news from overseas the past couple of weeks:

  • Economic Surprise Index from the Eurozone hits a six year high (source: Citigroup). Actual economic data is handily beating economists’ forecasts.
  • The world’s 4th largest economy, Germany, looks like it is ready to rock. Business confidence is at the highest levels in over 15 years. Manufacturing data is at a 79-month high and consumer confidence is at a record level.
  • Corporate growth also looks ready to resume. European companies may see double digit revenue growth and earnings growth of over 14% this year (source: Thomson Research, Morgan Stanley Research, JP Morgan Asset Management).

After several years of frustrating performance, many overseas stock markets are showing signs of life. Year to date, international stocks are handily outperforming US stocks. Could the tide finally be turning? Too early to tell. However, historically US and international markets have traded leadership over many different periods (see chart below). A recent report from GMO’s Rick Friedman highlights that the magnitude and duration of US outperformance the past decade has reached “extreme levels”. This is one of the reasons we have shifted assets to international stocks.
Source:  GMO Asset Allocation Insights:  Rick Friedman.  America is Great.  Home Country Bias Ain’t.  May 2017.

To discuss further, please contact your advisor or Jon at 301-543-6000.