With the capital markets in the United States nearing all-time records in all major indexes in equities, it’s easy for an investor to get caught in a bout of portfolio isolationism by allocating all investment capital domestically. However, Davis Advisors reminds us that investing abroad opens up investors to a wealth of opportunities that don’t exist in the U.S.
Although American businesses may be operating domestically, the race for capturing market share is a global competition. As such, investors may not even realize it, but their portfolio may already reflect international investments.
“Globalization is a reality,” said Christopher C. Davis, Chairman and Portfolio Manager at David Advisors. “You are a global investor even if you are investing only in the U.S.”
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The United States comprises just 25% of the world’s gross domestic product. This leaves investors with 75% of wealth-building opportunities to capitalize on through international markets.
With that macro perspective in mind, Davis, an industry veteran with over 28 years of investment management experience, poses an important question–“How on earth can you be looking to build wealth over the long term if you’re only looking at such a tiny minority of the world’s economy or the world’s population?”
While 2018 has been unkind to emerging markets, the latter half of 2018 and beyond could see the bulls finally wrestling control of emerging markets from the bears. Relative to U.S. equities, market analysts view emerging markets as those having attractive valuations at relatively cheap prices that could stem the tide should the U.S. capital markets experience a downturn after a serendipitous run up the past years.
“We’re looking at a time when international markets have lagged so that combination of quality, growth and value–that’s really an investor’s dream,” said Davis.