Investing Without Limits: Why Non-US Stocks Are Now in Focus!

Investing Without Limits: Why Non-US Stocks Are Now in Focus!

In recent years there has been increasing interest in non-US stocks, which is reflected in the investment strategies of many investors. Five years ago, an allocation to non-U.S. stocks was recommended based on three key points that have not only held but strengthened since then. Loud e-fundresearch.com Company-specific factors have now become more important than country-specific aspects.

What is particularly noticeable is that companies with sustainable value creation potential are increasingly being found outside the USA. This development goes hand in hand with more favorable earnings growth and return on capital employed (ROIC) expectations in these regions. The regulatory environment that favors disruptive business models is another advantage that investors should consider. Additionally, the increase in the share of nominal global GDP outside the US, which rose from 68% in 2011 to over 73%, demonstrates the increasing relevance of these markets.

The Attractiveness of Non-U.S. Stocks

Institutional investors are showing increasing interest in stocks from developed non-US and emerging markets. Companies in these countries have professionalized their operations while increasing their focus on shareholder returns. Valuation differences between US and non-US companies in the top quintile of sustainable value creation indicate attractive positioning for investors.

Still, the gap between the U.S. and the rest of the world in terms of economic growth and corporate profit margins remains historically high. Changes in the US government's policy direction and the EU's ambitions could lead to change in the future, especially as the growth gap between the US and the rest of the world narrows. Less preconceived notions about U.S. earnings growth could lead to a rethink among investors.

Current trends and recommendations

Another exciting aspect is the role of low valuations and high interest rates that are currently attracting investors. Loud Janus Henderson Stocks are increasingly benefiting from these trends, with artificial intelligence (AI) being seen as an important investment factor. Historically large valuation gaps and corporate reforms could motivate investors to rotate into non-U.S. stocks.

However, investors should take an active approach to risk mitigation, with a focus on fundamentals such as free cash flow and corporate governance. It is important to be aware that no investment strategy guarantees profits or eliminates the risk of loss. Particularly in emerging markets, higher volatility and a greater risk of loss must be expected.

In summary, the market for non-US equities is becoming increasingly important and conditions for investors are noticeably improving. The upcoming blog post will expand on the topic, focusing on the three global shifts that are favoring non-US markets.