A Compelling Opportunity: How To Reframe International Equity Allocations

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Manager Intelligence And Market Trends – February 2026

• The largest single asset class is Global Equity, which makes up more than half of PERA’s total fund.
• These products and services are usually sold through license agreements or subscriptions.
• The U.S. stock market remains a major driver of global returns, but expectations are changing.
• That makes it all the more important to recognize that periods of over- and underperformance are the norm when investing in a globally diversified portfolio.

This website may provide information about the brokerage and investment advisory services provided by J.P. Concentrated stock positions are large holdings that create unwanted risk to your portfolio or may be difficult to sell. Here’s a look at these changes and how they impact investment markets. This document may provide information about the brokerage and investment advisory services provided by J.P.

Key Factor Supporting International Value: Monetary Policy

Global Equity is a primary driver of investment returns over the long term, in addition to providing liquidity to the portfolio. Although global stocks tended to fall too, they only had a correlation of 0.62 and provided higher average returns than the US stocks. We can, however, measure the diversification benefit of global equities by looking at periods in which US stocks had a negative monthly return. Although the returns of the diversified portfolio are slightly less than those of investing in US stocks, the lower volatility results in a better (higher) Sharpe ratio. That requires combining investments that zig with others that zag in order to achieve the desired levels of risk and return in your client’s portfolio.

How Much Of Your Portfolio Should Be In Non-us Stocks?

The Global Equity asset class includes publicly traded stocks in companies based in the United States and abroad. Results represent portfolios constructed using median peer group track records, gross total return as of September 2024, in USD. CFA Institute is the global, not-for-profit association of investment professionals that awards the CFA® and CIPM® designations. Although this doesn’t always hold true, global stocks have prevailed in eight of the last 11 such instances.

How Much Of Your Portfolio Should Be In Non‑us Stocks?

But that’s not how the market is structured today. That doesn’t mean turning away from U.S. markets; it simply means building in more flexibility in case leadership shifts or volatility continues. While these numbers aren’t predictions, they’re helpful data points based on assumptions about earnings, valuations, currency shifts and dividends. The expected difference is about 1.4% annually – specifically, 8.1% for EAFE stocks (Europe, Australasia, Far East) versus 6.7% for U.S. stocks. That doesn’t mean it’s over, but it’s worth remembering that outperformance tends to rotate over time.

Practice Management

• If we compare the sample period with the entire dataset for US markets, we find that the average return is lower and average volatility is higher than in the 1970–present dataset.
• We couldn’t speculate on how the historical performance comparison may have differed if we hadn’t picked up such a positive period for US stocks.
• The model assumptions are passive only – they do not consider the impact of active management.
• It wasn’t that long ago that everyone seemed to hate US stocks and wanted to increase their allocation of global equities (particularly emerging markets).

Loomis Sayles is a leading investment management firm, delivering innovative strategies through deep research and a commitment to helping clients achieve their financial goals. There is no guarantee that the investment objective will be realized or that the strategy will generate positive or excess return. Performance data shown represents past performance and is no guarantee of future results. All investments are subject to potential loss of principal.

Overlay programs can help to monitor global exposures, aim to fill in necessary gaps through portfolio completion and ultimately seek to mitigate unintended risks. We believe that illuminates the importance of managing risks in investors’ asset allocations. The model cannot account for the impact that economic, market, and other factors may have on the implementation and ongoing management of an actual investment portfolio. References to future returns for either asset allocation strategies or asset classes are not promises of actual returns a client portfolio may achieve. For example, changes in the historical data from which it is estimated will result in different implications for asset class returns.

• This document may provide information about the brokerage and investment advisory services provided by J.P.
• JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.
• First, the diversified portfolio increases the Sharpe ratio by only 5%.
• Global equities currently have a negative annual return, which history says could be a precursor to outperformance in the next five years.
• The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products.

• Investors who chased performance and made significant shifts in their allocations following the global equity outperformance have recently been burned.
• The following table compares US and global stocks as well as a diversified portfolio of 75% US stocks and 25% global stocks.
• Exceptionalism Drives Advisor Allocations,” a biannual survey of financial professional data based on thousands of client interactions.
• Volatility measures the extent to which returns vary over time.
• Note that these asset class and strategy assumptions are passive only – they do not consider the impact of active management.

Since 1970, there were 207 months in which US stocks were down. Within these past 44 years are six of the seven longest bull markets in US Everestex exchange review history (see the following table). First, the diversified portfolio increases the Sharpe ratio by only 5%. Equally important from a diversification standpoint is that these two asset classes experience different levels of volatility, which you can see in the following chart, which breaks out annualized standard deviation by decade.

Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Both past performance and yield are not a reliable indicator of current and future results. Investors should ensure that they obtain all available relevant information before making any investment. The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P.