Broker Check

International Stocks Worth Another Look

| May 13, 2019

The ongoing trade debate between China and the U.S. is losing its steam following the early 2019 Chinese economic rebound (6.4 percent gross domestic product growth in the first quarter). It was a higher-than-expected result and made three large banks raise their 2019 Chinese economic growth outlooks.

And as a result, it looks like we may have a recovering global stock market. That makes sense as international markets tend to trail U.S. markets, which have been doing well.

The good performance is despite a currency crisis, geopolitical fallout, recessionary data from global economic ivory tower watchdogs, negative Japanese interest rates, and socialist cries calling for the end of capitalism. Simply put, stocks around the world are in rally mode.

The below chart is an index of the entire world’s equities. Plain and simple, it shows that the entire world index is rising.

In fact, the index yielded 1.91 percent, which is actually higher than the dividend yield of the S&P 500, which stands at 1.31 percent. So, money that has always flown to U.S. blue chip stocks that pay dividend income seems to be finding its way to global large cap stocks that pay higher dividends.

The chart below shows the Emerging Shares iShares MSCI ETF and also tells an interesting story. As you can see, it hit fresh highs at the end of April 2019.

International forward-looking price-to-earnings (P/E) ratios are also showing signs of global growth and the price of U.S. stability. The forward-looking P/E ratio for the S&P 500 is around 16.4, while the P/E ratio for the world index is 15.77 and the emerging markets ETF is only 11.84.

That means there’s a premium to be paid for the safety of the dollar. However, this data suggests there are also great international buying opportunities out there. The key will be overcoming the usual reluctance of American investors to deploy money abroad.

Securities sold through CoreCap Investments, Inc., a registered broker-dealer and member FINRA/SIPC; advisory services offered by CoreCap Advisors, Inc., a registered investment advisor. Cornerstone Financial and CoreCap are separate and unaffiliated entities.