HAWX - A Case For International Investing
2024-01-26 03:33:03 ET
Summary
- Many investors have given up on international stocks in favor of U.S. stocks only.
- This recency bias comes at the worst time, with US stocks currently overvalued, making them poor long-term investments.
- International stocks offer better valuations, providing diversification benefits for investors.
- I examine the research on why investors should include and maintain an allocation to international stocks as part of their long-term portfolios.
The Problem of Recency Bias
The S&P 500 Index recently hit an all-time high. Unfortunately, few realize that when we adjust for the money supply, stocks remain at levels they reached back in 1996. $1 in 1996 is equal to $2.00 in 2024, so investors need double what they had in 1996 to have the same standard of living. This is profound when you look at this chart.
This makes today's extreme overvaluation as I discussed in my last piece, The Age of Overvaluation , all the more concerning. It is important to keep the current valuation as measured by the CAPE ratio, in mind when making decisions of how to allocate capital over long periods of time....
A Case For International Investing