Market & Topical Perspectives

More Bang for Your Buck

More Bang for Your Buck

The campaign against inflation launched in early 2022 shook up the hierarchy of financial markets after years of relatively steady leadership. Among the more notable—and potentially most durable, in our view—developments resulting from tighter financial conditions globally has been the outperformance of non-US stocks relative to US names.

Key Takeaways

  • US equities surged ahead of their international counterparts beginning in mid-2014, driven by a strong dollar and low discount rates that favored investment in long-duration stocks such as those comprising the NYSE FANG+ Index. Excluding the effect of these factors, relative outperformance was far less significant.

  • Market dynamics began to shift with the onset of the Fed’s aggressive rate-hike campaign in 2022, prompting a rotation in leadership toward international stocks as the dollar weakened and NYSE FANG+ performance grew volatile.

  • In our view, investment success likely will be predicated less on exposures to particular styles or geographies and more on identifying quality companies globally whose tangible and intangible attributes position them to navigate what seems likely to be a complicated and volatile environment.

  • The rapid expansion of valuation multiples in the US suggests non-US markets currently may offer more “bang for your buck,” or a lower cost per unit of profit.