Will the Outperformance of Non-U.S. Equities Continue?

August 11, 2017 | David Hernandez, CFA, Director of Traditional Manager Search

After several years of trailing the S&P 500, international equities are off to a strong start, returning 17.1% year-to-date through July. Is this the start of a longer term trend? This week’s chart examines the historical performance of the S&P 500 and the MSCI EAFE over the last thirty five years.

Since October 1982 the S&P 500 and MSCI EAFE have taken turns as the leader, each embarking on significant bullish runs. Between 2000 and 2007, international equities (7.2%) outperformed domestic stocks (1.4%). Then between 2007 and 2016, the S&P 500 beat the MSCI EAFE by over 7% on an annualized basis. The data shows that long periods of outperformance have been a common occurrence for both indices.

This year international equities have outperformed. They have benefitted from strong economic and earnings momentum, a clearer political landscape, and positive currency returns. All equities are expensive, but non-U.S. equities appear less expensive than their U.S. counterparts. While we cannot predict the future, the improved backdrop and relatively attractive valuations bode well for international equities.

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David Hernandez, CFA
Director of Traditional Manager Search

Get to Know David

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

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