The U.S. equities market has been the default play amid global uncertainty from geopolitical factors and macroeconomic headwinds. That said, international equities could benefit in a 2024 market by rate cuts implemented by central banks around the world.
High interest rates have tamped down growth expectations for international equities. International assets, in developed and undeveloped markets, are typically tied to the performance of the local currency against the dollar. And a strong greenback the past few years resulted in lesser demand for international assets. However, a recovery is underway, albeit a slower one, according to Charles Schwab.
“The big picture we see for 2024 is of a shallow U-shaped recovery in global economic and earnings growth, rather than the V-shape seen in the last two global recessions of 2008-09 and 2020,” noted Charles Schwab. “If in 2023 the global economy experienced a soft landing with growth for much of the Group of Seven countries (Canada, France, Germany, Italy, Japan, United States, and United Kingdom) stalling but not contracting much, then it’s also likely that a soft recovery gets slowly underway during 2024, with growth rebounding only modestly (and unevenly) throughout the year.”
There is also uncertainty ahead of 2024, which should add a dose of volatility in international equities. That said, a measured approach could help, which underscores quality and fundamentals.
“Global stocks may react with heightened volatility to the seemingly chaotic data points as parts of the global economy move in different directions, with a broader stabilization and recovery only visible over time,” they added. “Patient investors in global stocks with an eye on the big picture may benefit despite an uneven path higher should markets discount better growth ahead supported by rate cuts among major central banks.”
Get Quality International Exposure
One way to get quality exposure with measured selectiveness is via the American Century Quality Diversified International ETF (QINT). The fund seeks to capture the performance of large- and midcap companies outside the U.S. that possess attractive quality, growth, and valuation fundamentals. QINT follows the American Century Quality Diversified Intl Equity Index, which offers investors a wide array of diversification that focuses on quality.
More specifically, the index includes the stocks of companies based in developed economies outside the U.S. and companies based in the rising economies of Taiwan, South Korea, Hong Kong, and China. In essence, the fund includes a mix of developed markets for quality as well as emerging markets that offer more growth exposure. QINT includes 378 holdings as of December 18, which helps to avoid over-concentration and therefore minimize exposure risk.
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