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2020 vision a good look for international equity
International equities are set to improve at the expense of US equities over the next 12 months as markets finally find the floor after a tumultuous 2019, a global investment manager has indicated.
2020 vision a good look for international equity
International equities are set to improve at the expense of US equities over the next 12 months as markets finally find the floor after a tumultuous 2019, a global investment manager has indicated.
T. Rowe Price recently shared its knowledge and investment to provide a number of predictions for 2020 at its annual global market outlook briefing.
The global investment management organisation indicated that international equity markets have serially lagged US markets over the last 10 years – the result of “a combination of structural factors, currency, widening valuation disparities and cyclical factors”.
It observed a “continuation of underperformance as global economies have slowed and international earnings have been disproportionately affected by the US and China’s trade dispute”.
Despite the circumstances and undervalued currencies, it is T. Rowe Price’s view “that the cyclical conditions for international equities to outperform are present”.
This perspective is based on the belief that “growth and inflation expectations have now bottomed out, and takes into consideration the fact that markets are 18 months into a capital expenditure recession, are eight months into an inventory correction, and have been facing political headwinds from the trade war and Brexit”.
T. Rowe Price’s stance on international equity markets is one held just as firmly by portfolio manager and chief investment officer Justin Thomson, who said he anticipates that the cyclical conditions are now right for outperformance (when compared with US equities).
“We may be on the verge of a shift,” he said, noting how heavily recent political headwinds have been felt internationally.
Some of the structural merits for a pick-up in international markets include rising innovation, better corporate governance models, and better demographics exhibiting across emerging markets.
For Mr Thomson, “there is also the potential for valuation to catch up in international equities”.
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