Global Equities Break Out

Market Blog
November 8, 2019

Investors cheering the S&P 500 Index’s fifth record high in the past two weeks may be missing a more impressive breakout in global equities.

The MSCI ACWI Index—a benchmark that captures stocks in the United States, developed international, and emerging markets—has returned 22% year to date, bringing it to within 1.5% of its first record high since January 2018.

It’s encouraging to see non-U.S. stocks carrying more weight recently, even though the global benchmark has trailed the S&P 500 by about 3 percentage points this year.

The MSCI All-Cap World Ex.-U.S. Index has returned 9.1% since August 19, outpacing the S&P 500 and Russell 3000 Index by about 3 percentage points over that period.

“It’s significant that this widely followed measure of global equities is on the verge of a breakout to new record highs, its first new high in nearly two years,” said LPL Financial Senior Market Strategist Ryan Detrick. “A strong global bull market with good breadth adds to the bullish case for U.S. equities, while better performance from international equities can help globally diversified investors achieve greater benefits from diversification.”

msci-all-cap-world-index

We’re becoming believers in global equities’ story. Further progress on trade and an improving international economic growth outlook may increase demand for developed international and emerging market equities. Ebbing trade tensions may put further downward pressure on the U.S. dollar. Attractive valuations for international stocks may entice investors to look more closely at stocks in Europe, Japan, Southeast Asia, and Latin America.

We continue to recommend long-term strategic investors consider holding globally diversified equity where suitable portfolios. For more tactical investors heavily concentrated in the United States, it may be a good time to start looking outside our borders.

 IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual security. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. The economic forecasts set forth in this material may not develop as predicted.

All indexes are unmanaged and cannot be invested into directly. Unmanaged index returns do not reflect fees, expenses, or sales charges. Index performance is not indicative of the performance of any investment. All performance referenced is historical and is no guarantee of future results.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.

Investing in foreign and emerging markets securities involves special additional risks. These risks include, but are not limited to, currency risk, geopolitical risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.

This Research material was prepared by LPL Financial, LLC.

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