Stock markets have performed very well through July; with most major indices posting double digit returns. International developed and emerging markets are on pace to outperform U.S. markets for just the second time in eight years. It is a welcome change for broadly diversified investors and is likely to continue.
The growing importance of the world economies has pushed their cumluative market capitalizations above that of the United States. This means that more than half of the world's market value resides outside the U.S.
The portfolios that we manage maintain a meaningful weight in international stocks and bonds for two reasons: relative valuation and diversification. There is no one data point that captures the accurate valuation of any company or market so we look at a variety of different measures. Currently international stock markets trade at a 35% discount to their U.S. counterparts based on the average of price-to-earnings, book value, sales, and cash flow. International economies have their issues but this discount covers a lot of flaws.
While global economies and markets have become more connected in the last several decades, overseas investments still provide diversification for investors. During the last 30 years international stocks have outperformed U.S. stocks 13 times. Plus, when international stocks have outperformed they provided a 10% higher return on average.
What is your international and emerging market portfolio balance? One of the benefits of working with Security National Bank is our ability to build diversified, cross-market portfolios at a low cost and with minimal complications for you. Contact your Security National Bank Wealth Management advisor to learn more.
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