Foreign stocks have enjoyed improved performance in 2017 after selling off in response to the November presidential election.
Fears over trade protectionism have lessened for the moment as the Trump administration has made domestic policy a priority, particularly taxes, regulation, and immigration. Investors have been concerned that punitive trade measures could hurt trade-dependent overseas economies, especially emerging markets. Trade is more important for many foreign economies than it is for the U.S., which (believe it or not) relies comparatively little on imports and exports relative to the size of the economy.
Another factor boosting overseas results is improved economic performance. This chart shows that regional manufacturing has rebounded across the globe. The jump comes following 30% appreciation in the U.S. dollar, which helps to make foreign goods more competitive. As a result, corporate earnings have rebounded in foreign developed and emerging markets following a multi-year decline.
We continue to believe that inexpensive valuations for overseas assets suggest attractive long-term return potential. Even so, we expect continued volatility over the near term, especially as markets turn their attention to Aprils French presidential election and its implications for the European Union.
This report is based on data obtained from sources we believe to be reliable. Hefren-Tillotson does not, nor any other party, guarantee the accuracy or completeness of this report or make any warranties regarding results obtained from its usage. All opinions and estimates included in this report constitute the firms judgment as of the date of this report and are subject to change without notice. This report is for informational purposes only and is not intended as an offer or solicitation to buy or sell the securities herein mentioned.