Things are looking up for international stocks, which is an indication of an improved global economy.
Thanks to an easing of the “trade war” between the U.S. and China, market strategists are predicting good news for international equities, especially for European stocks.
What the Current Markets Look Like
Looking at last year, stocks around the world were strong, but the U.S. was the strongest. The international index rose 18.1%, while the U.S. S&P 500 went to more than 28%.
Looking at this year, equities dropped in the first trading days of the global stock market in 2020, due to the U.S. airstrike that assassinated a top Iranian military leader.
Despite that incident, oil prices managed to moderate and stocks avoided a multi-day selloff.
Now Is the Time to Consider International Stocks
The U.S. market has been having a strong run and has been dominant for a decade, with a gap growing between domestic and foreign equities.
Since 2010, the U.S. S&P rose at an annualized rate of about 11.2%, while the global MSCI World ex U.S. index rose about 4.2% per year.
When looking at those numbers without annualizing the rate, the U.S. S&P rose 188% while the MSCI World ex U.S. index rose 50.5%, which appears more dramatic.
Many investors had a lot of investment in domestic equities, with little to no international exposure, though gains were steady.
Analysts and strategists have advised some clients to diversify and invest more of their portfolio into international stocks, so all their eggs aren’t in one basket, because right now there is less risk.
In Europe, there were countries whose stocks did better than the U.S. in 2019, which included Russia and Greece.
One major European index, the Stoxx 600, gained 24% last year.
Europe is more affected by the global economy than the U.S., and when things are going well globally, that also affects Europe.
One example is China. Chinese growth has a large impact on the whole world’s economy and the current improvement in trade relations with the U.S. is improving international markets.
There Is a Global Rebound Happening
Now is a time for optimism for international markets. Indicators shown in global economic data indicate that the slowdown that world trade was experiencing might have bottomed out, and there have been upticks in measures of manufacturing and global trade.
These upticks show signs of manufacturing and trade not only being improved, but that these improvements can be sustained.
There Are Always Risks When Investing
With the tensions as they are in the Middle East, there is always the risk of higher oil prices. The recovering relationship between China and the U.S. could have a set back and trade tensions could increase again. Inflation could increase if there is further geopolitical strife, and the world’s central banks could change interest rate policies.
These are just some of the risks that could affect recovery of the global markets. But that is also what could make your investments worth more if things go better than expected!