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Don’t Forget International Investing

January 06, 2022

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Financial Connections has always invested globally. It is a big world and there are many ideas and successes outside the United States. Over the last decade, growth in the U.S. has exceeded international. However, the decade before that, international outperformed the U.S.

As you can surmise, these things cycle. There isn’t a warning when one part of the world will outperform another.  We believe it is wise to be diversified globally so you can participate when the rise begins.

According to Capital Group (American Funds), economist Robert Lind predicts GDP growth rate in the major European countries will be around 5% next year – twice that predicted for us.

Twenty years ago, developed markets outside the U.S. were comprised primarily of financial institutions and energy. Today, the largest sectors are information technology, health care, and consumer related companies.

Another bonus of investing overseas is the lower valuations overseas compared to the U.S. Even what might be considered “non-technology” companies are investing heavily in technology. Such companies as Nestlé and L’Oréal have nearly doubled their revenue from e-commerce.

International companies are more likely to pay dividends than the U.S. and at a higher rate. As an example, according to Capital Group, 700 companies with headquarters outside the U.S. offer dividend yields in excess of 3% compared to only 89 U.S. companies (as of 10/31/2021).

The impact on earnings can be related to the valuation of the dollar. Capital Group predicts the dollar will decline after a decade long bull market. A weaker dollar can make U.S. products more competitive.

Our international investing also includes options for Socially Responsible Investing. Feel free to chat with us about the opportunities.

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