Investors with meaningful exposure to international equities are reaping the benefits of a broad-based rally in European and Asian markets. Developed international stocks have outperformed the S&P 500 by over six percentage points year-to-date, driven by improving economic fundamentals and attractive valuations.
Portfolio managers note that many foreign markets trade at significant discounts to U.S. stocks on a price-to-earnings basis, offering compelling value for long-term investors. Currency tailwinds from a weakening dollar have further boosted returns for U.S.-based investors.
Despite the recent outperformance, most American investors remain heavily underweight international stocks relative to global market capitalization benchmarks.
