International Equities At (Or Near) An Inflection Point

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Please note: Data sourced from Wells Fargo Advisors/Morningstar as of 6/30/18. Index performance is total return performance which includes gains and losses plus income unless otherwise noted. You cannot invest directly in an index. Past performance is not an indication of future results.

According to a 2018 Insight report from Hartford Funds entitled, “A Reboot for International Equities”, as they researched 5-year rolling returns since the mid-1970s, Hartford observed multiple periods of U.S. outperformance, followed by periods of international outperformance and then returning to U.S. outperformance again. The average cycle run was 7.3 years. Seeing as we are now more than 7.3 years into this cycle of U.S. outperformance, perhaps a shift in the outperformance pendulum is due from a statistical standpoint.

Furthermore, looking at current valuation indicators, international equities, across developed markets and emerging markets, appear more attractive relative to U.S. equities. For these purposes, we used both the Current Price to Earnings (P/E) Ratio and the Forward Price to Earnings (P/E) Ratio as current valuation indicators.

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Please note: Data sourced from Bloomberg as of August 23 2018. Current P/E is the ratio of a stock and the company’s earnings per share and is calculated as the stock’s price divided by trailing twelve-month earnings per share (EPS). Forward P/E is calculated by dividing the price of a security by Bloomberg estimates of earnings per shares, looking at consensus estimates for the next four quarters. You cannot invest directly in an index. Past performance is not an indication of future results.

Global Economic Growth Forecasts

Economic growth, as measured by gross domestic product (GDP), has been robust in the U.S. thus far in 2018. This may be beneficial for international equities looking ahead as international economic cycles have typically lagged U.S. economic cycles by 1 – 3 years according to a Buffalo Funds research report published in August 2018 entitled, “The Case for Investing Internationally.” Additionally, according to this same report, GDP is actually growing faster in certain regions outside the U.S. and is projected to continue to outpace U.S. growth.

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Disclosure: Hennion & Walsh Asset Management currently has allocations within its managed money program and Hennion & Walsh currently has allocations within certain SmartTrust® Unit ...

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