Foreign Stocks & Emerging Markets

Investors, Find Bargains Overseas in 2018

Time to check your allocations. The bull run in the U.S. means the better valuations are abroad.

Global markets give U.S. investors the chance to broaden their bull market gains. “We like international stocks across the board,” says strategist Samantha Azzarello, of J.P. Morgan Asset Management. For a moderate-risk portfolio with 60% of assets in stocks, Azzarello thinks 21% of stock holdings should be invested internationally—15% allocated to developed markets and 6% to emerging markets.

After a long bull market here, investors are likely to have too much of their money riding on the U.S. And because most investors already have a strong home-market bias, the imbalance could be pronounced, says portfolio manager Kathryn Koch, of Goldman Sachs Asset Management. “Investors need to move beyond U.S. borders to where there are interesting growth opportunities at much better valuations,” she says.

In Europe, for example, major stock indexes have yet to return to their 2007 peaks, while Standard & Poor’s 500-stock index is 65% higher than its 2007 high point. Eurozone manufacturing activity is hitting six-year highs, unemployment is at an eight-year low, and corporate profits are growing. The MSCI Europe index returned more than 20% through October 2017 but trades at a price-earnings ratio of just 15, compared with 18 for the S&P 500.

Portfolio manager Saira Malik, global stock chief at investment firm Nuveen, likes stocks that are tied to the growing economy in Europe. She recommends ING, the Dutch banking giant, traded here as an American depositary receipt (symbol ING, $19). Oakmark International (OAKIX), a Kiplinger 25 fund, has 57% of assets invested in Europe.

Emerging markets have rallied sharply since 2016 but are still in the early stages of a multiyear winning streak, says Kate Moore, chief stock strategist at BlackRock. She sees a broad-based earnings recovery in both new- and old-economy sectors, including tech, industrials and energy, bolstered by growing economies and business reforms. Still, she notes, average P/Es are below those of developed markets. She sees opportunities in markets including India, Indonesia, Brazil and Argentina. Investors who prefer to navigate risky emerging markets with professional help should consider Kip 25 fund Baron Emerging Markets (BEXFX).

Experts disagree on the prospects for Japan. The country faces demographic pressures from an aging population, which will keep a lid on economic growth. But Japan’s Nikkei index recently traded at a 21-year high. The bulls point to recent solid economic readings and companies that are major players in leading-edge trends, including electric and autonomous-drive vehicles, factory automation, and serving the emerging world’s burgeoning consumer class. T. Rowe Price Japan (PRJPX) is a solid choice for investors.

Most Popular

13 States That Tax Social Security Benefits
social security

13 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in these 13 states, your Social Security benefits are subject to a state tax. That's on…
October 4, 2021
10 Best Stocks for Rising Interest Rates
stocks

10 Best Stocks for Rising Interest Rates

The 10-year Treasury yield is hovering near its highest level in months. Here are 10 of the best stocks to buy in a rising interest-rate environment.
September 30, 2021
How Big of a Threat Does Inflation Pose to Your Retirement?
retirement

How Big of a Threat Does Inflation Pose to Your Retirement?

You might be surprised how much inflation can nibble away at your retirement nest egg over time if you aren’t prepared.
October 3, 2021

Recommended

Robo-Advisers: Weighing the Worth of Automated Advice
investing

Robo-Advisers: Weighing the Worth of Automated Advice

Some people do just fine with bare-bones advice that’s essentially generated by an algorithm. Until your financial life gets more complicated, you mig…
October 17, 2021
Kiplinger's Weekly Earnings Calendar
stocks

Kiplinger's Weekly Earnings Calendar

Check out our earnings calendar for the upcoming week, as well as our previews of the more noteworthy reports.
October 15, 2021
Yogi Berra Quotes Investors Can Live By
investing

Yogi Berra Quotes Investors Can Live By

Baseball legend Yogi Berra was wise, in his own muddled way, about more than just sports. His words hold truth in life – and in investing. Here are th…
October 13, 2021
Is Stagflation a Serious Market Risk?
investing

Is Stagflation a Serious Market Risk?

High inflation and corporate warnings of supply chain issues have brought stagflation fretting to a fever pitch.
October 12, 2021