US Stocks Overvalued Relative to Overseas Markets, Prompting Investors to Seek Value Abroad
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Stock valuations in the US are very high historically, indicating low future returns. This prompts looking for value overseas where prices are lower.
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Earnings of US and non-US companies have a high degree of crossover, yet investors value earnings from the US far higher. This valuation difference seems unjustified.
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The idea that non-US companies lack dynamism does not hold up. European firms have long traded at discounts even within most sectors, and these discounts have recently deepened.
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Many emerging markets offer potential value, like Mexico, Vietnam, South Korea, and Taiwan, which stand to benefit from global economic trends.
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Betting on overseas value stocks remains a leap of faith, but allocation shifts suggest professional investors are losing tolerance for extreme US valuations.