AMERICA FIRST? NOT FOR STOCKS

Overseas can be fertile ground for savvy investors

Even as President Trump pushes an “America First” agenda, Wall Street pros think it’s a good time for investors to look outside the U.S. for stock opportunities.

U.S. stocks have done far better than emerging market equities and global stocks in developed nations since the bull market began in March 2009. Domestic stocks have jumped nearly 250%, while their global counterparts have risen almost 100%, according to Bespoke Investment Group, a Wall Street research firm.

With U.S. stocks trading in overvalued territory after their long rally, investors are likely to reap better returns going forward in places like the eurozone, and in emerging markets like Brazil, and Central and Eastern Europe. These foreign markets now have characteristics that suggest future gains will outpace U.S. returns. Working in their favor? They’re selling at more affordable prices, and are home to economies on the upswing and companies poised to post stronger growth.

“If investors have additional capital to invest, we believe one of the first areas to target today would be international stock markets,” advises Sean Lynch, co-head of global equity strategy at Wells Fargo Investment Institute.

Long market cycles like the one since 2009 when U.S. stock returns topped the rest of the world eventually end. New cycles are accompanied by new leaders. The shift may already be underway. So far this year, the MSCI Emerging Markets index is up 12%, double the 5% gain of the broad U.S. stock market, according to Bespoke.

“Investment returns go in cycles, don’t forget that,” says Rajiv Jain, manager of GQG Partners Emerging Market Equity fund.

Rather than look at the past and commit cash to stocks that have done the best, investors need to identify where the next wave of better returns will be. “The best opportunities are in markets that have gone through significant pain,” he says. “You need two things: cheap stock prices and economies that are improving.”

Europe and many emerging markets fit that description, Jain says.