Quarterly Conversations – U.S. Dollar & International Markets

Featuring: P.J. Gardner

In this video, AGW Principal & Co-Founder P.J. Gardner, CFA®, CFP®, discusses the reasons why investors should consider investing in international stocks. This conversation was recorded on August 7, 2023, and reflects information available at that time.

Audio Only


  • The valuation of international stocks is more attractive than that of US stocks. International stocks offer higher dividend yields than US stocks.
  • The global middle class is growing, and international companies are well-positioned to capitalize on this growth.

Full Transcript

So another interesting thing to look at is that it gets a little bit of maybe a knee-jerk reaction to last year, where despite all the headlines that were going on in Europe and all the negative news, with Ukraine, and what appeared to be an imminent energy crisis in a recession, international stocks outperformed. And I think that’s very interesting to note.

Something that we’ve been following for some time, it’s just the outperformance of the US versus the International, is the longest period that we’ve seen by a multiple 14.2 years the US outperform the international market. And it did so by an astounding rate of 277%. Nothing even gets close in duration, and the only thing in magnitude that’s comparable is when Japan, you know, everybody thought would take over the world in the late 80s. International outperformed to earn 99% versus the US.

So I think it’s interesting to say, Where am I going to invest today? Why did international hold up so well? And a good way to back into that is why the U.S. has done so well for the past 14 years leading up to last year. Some people would say cash will earnings have been much better than us. And that’s true, but it’s not by much.

Really, if you look at it, earnings increased in no small part because of the Trump tax cuts. The other thing that you had was a strong dollar. So I’d say that’s number three. And then the most powerful was margin expansion. And so if you look at multiples today, the price earnings multiple broadly speaking in the US using the MSCI data is 20 times earnings international 13. So you’re paying more than half again to own US stocks. From a dividend yield, how much do you get paid while you wait? 2x. So U.S. 1.46 International 3.1.

Interestingly, people look at the US and said, look how well it’s doing this year, and that’s true. 21% versus 14, but you’re in the same spot over a one-year basis. Actually, the international markets have outperformed by a marginal amount over the last year because US stocks had such a downturn last year.
I think international stocks still give you a margin of safety that US companies do not. People quickly point to well; these various economies have question marks; they do. But you have to remember, companies are not countries. They’re competing in many cases for the same consumers as the US; global multinationals are as well.

I’d say longer term; if you say how we are going to get from this period today to a faster-growing economy globally, I still go back to the global middle class. And that global middle class is growing in places that aren’t in the US and even in the developed markets in Europe. How are companies positioned to cater to India, Mexico, Indonesia, et cetera? That’s where the middle class is going to grow.
And just like we enjoyed a phenomenal period of excess growth with the Baby Boomers show to are these economies.

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