Bespoke posted this chart on the breakout in the Stoxx 600 as well as the table of the “expected forward returns” to the Bespoke Report this week, and added a few other pages, but rather than cut-and-paste the whole series, let me say that being a regular reader of Bespoke the last 10 – 15 years has served me well.
What’s happening in Europe and around the world is something US readers can probably understand: it’s the steady rightward drift in political victories, that started with the South American Argentina President Javier Milei victory in 2023, Italy’s Georgia Meloni's appointment to Prime Minister in October, 2022, the US’s President Trump in November ’24, and might continue in Europe when Germany holds their elections later in February ’25. Bloomberg ran a headline in the last few weeks noting that Macron has lost some popularity in the polls, although the next French President isn’t expected to be elected until April 2027, while Kiel Starmer, the UK Prime Minister, is off to a rough start.
While some of the major European issues are non-economic, the fact is Argentina’s ARGT ETF, was one of the best-performing single-country ETFs in 2024, along with Israel, with the point being that rightward-leaning politicians tend to be first-and-foremost pro-business, and what’s good for the domestic economy, is typically good for the country’s stock market.
Whenever you are writing about politics, people can be easily offended, but this post was written with the intent to be as objective and analytical as possible about this topic.
If readers think this rightward political shift is something new, it really isn’t: it happened in the early 1980’s with Margaret Thatcher’s ascension to Prime Minister in the UK, and then followed by Ronald Reagan’s victory in November, 1980, and played out throughout much of the 1980’s. Bush 41 followed Reagan, and John Major followed Thatcher, and this was long before the EU and the “United States of Europe”.
Just like economic cycles, the world goes through political cycles as well, and we are headed into another cycle, from which US investors might benefit, both from a portfolio diversification standpoint, as well as an absolute return standpoint.
Keep an eye on the European stock market and the various European equity ETF’s.
International Annual Returns:
This somewhat crude spreadsheet is this blog’s way of tracking the annual returns of some select international funds and ETF’s.
If readers want to recommend any not found above (and no doubt there is plenty), please do so.
The Vanguard Europe ETF (NYSE:VGK) was added to list this month given it’s +6.35% YTD return.
Clients current international exposure currently consists of the JP Morgan Developed International Fund (JFEAX), the iShares Emerging-markets ex-China ETF (NASDAQ:EMXC), and the Vanguard FTSE Developed Market ETF (NYSE:VEA). This blog also has a small position in David Herro’s Oakmark International Fund (Oakix).
This Bank of America chart shows the Mag 7 vs “global equities”.
It may be time to re-balance and add to international equity, with a more focused approach.
(This blog has been posting more frequently on international equity returns given the complete lack of interest or enthusiasm in the asset class, check here, here)
Disclaimer: None of this is a recommendation or advice. Past performance is no guarantee of future results. Investing can and does involve the loss of principal, even for short periods of time. None of the above information may be updated and if updated, may not be done so in a timely fashion.
Thanks for reading.