Source: Wind

The US stock market climbed in 2023, but globally, stocks in non-US markets performed better.

As of Tuesday, the Morgan Stanley Capital International (MSCI) global (excluding the US) index, which tracks developed and emerging market stocks, rose 7.4 per cent in 2023, outpacing the 3.9 per cent rise in the S & P 500. In the three months to Tuesday, the international stock index rose 21%, while the u.s. stock index rose 8.5%.

The rebound in global stock markets marks a marked departure from market conditions over the past decade, when US stocks outperformed international indices. Many investors have long said that the global power of U. S. companies makes it unnecessary for them to consider investing their money in the U. S. market. But now that concerns about the international economy have eased, the prospects for stock markets in non-American markets are relatively bright.

"A lot of investors have given up on international investments in the past year or two, but we are entering a very different environment," says Andrew Slimmon, senior portfolio manager at Morgan Stanley Investment Management (Morgan Stanley Investment Management). "they will reluctantly move money outside the United States."

Mr. Slimont said his global equity fund has increased its holdings of Asian stocks excluding Japan.

Even after the recent rally, the share prices of multinationals seem to be lower than their US counterparts. Wall Street often uses the ratio of a company's share price to earnings to measure whether the stock is reasonable or too high.

Companies in the S & P 500 are currently trading at about 17 times forward earnings, according to the data. By contrast, the STOXX Europe STOXX Europe index trades at about 13 times local currency earnings, while the Hang Seng index trades at about 10 times earnings.

Meb Faber, co-founder and chief investment officer of Cambria investment Management, said: "buying expensive investments has always been and will be the biggest risk." The company's momentum fund and value-focused exchange-traded funds have recently been increasing their holdings of non-U. S. market stocks, he said.

For most of last year, investors shunned non-US stocks as they weighed the conflict between Russia and Ukraine, the potential energy crisis in Europe and the turmoil in the UK bond market. With the Fed raising interest rates aggressively, the US labour market and the flexibility of consumer spending have made the US a safe haven for investors.

While the challenges facing global markets have not completely disappeared, some investors believe the dark clouds have dissipated and are ready to dabble in non-US stock markets. Europe has experienced a warmer-than-expected winter, easing the pressure on energy supplies.

"you don't need to dispel all your worries. But if some negative sentiment starts to peak and start to reverse, it will suddenly have a positive impact on performance, "said Jeffrey Germain, head of Brandes Investment Partners Investment Group.

The recent fall of the dollar from its highs has also helped boost returns for dollar investors. The dollar closed last week at its lowest level since June, compared with a basket of other currencies.

Investors injected a net $2.3 billion into international equity funds in the week to Wednesday, the largest weekly inflow since April, according to the data. At the same time, they withdrew a net $3.2 billion from US funds over the same period.

Nor are the international markets dominated by large technology companies, which have dragged down the US stock index as interest rates rise. By the end of 2022, technology stocks accounted for about 11 per cent of the MSCI global (excluding the us) index, while the sector accounted for 26 per cent of the s & p 500, according to their respective index providers. The largest sectors of the international index are financial and industrial companies.

Edit / isaac