Global Gains: The Smart Way to Invest in International Equities

Image Source: The Business Finance

International stock investors can exploit good valuations and diversification potential with risks of U.S. market over-concentration. How to play is:

Direct Stock Picks: Buy high-quality compounders (persistent ROOCE) and undervalued cyclicals in Europe (e.g., Germany's DAX) and Japan (reforms).

ETFs/Index Funds: Use low-cost funds tracking MSCI EAFE or EM indices for diversified exposure.

Active Management: Select funds that blend value and growth philosophies, like Morgan Stanley's International Equity Strategy.

Sector Focus: Invest in AI-driven industrials, health care, and infrastructure winners of fiscal transitions (e.g., Germany's €500B fund).

Why now?

Valuation gap: S&P 500 at ~22x forward earnings relative to more reasonably valued international peers.

Policy catalysts: Europe's fiscal reforms and Japan's wage gains add to allure

Sources: J.P. Morgan, Calvert, Thornburg

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