Name: Here Are the International Stocks to Own In 2017
Uploaded: 2016-11-30
Duration: 6 min 46 s
Description: Our panel of investors weigh in.

[ SOUND ] [ BLANK_AUDIO ] I want to talk a little bit about international stocks in part because I think we've been seeing even more volatility in the stock markets as people wonder what Trump will do, what a Trump administration will do with regard to trade. Sarah, I know that that's really kind of your bailiwick, and you were mentioning before we went on the air that your clients are Happier to see you after the election. And I'm wondering what's making them happy and what's making you interested? Yes, the value rally that began a few months ago after several years, a good five plus years of being, at least in the US market, out of favor. The value stocks have come back and the impetus for this has been in part, the shape of the yield curve. So, U. K, European Union, [ UNKNOWN ] with the U. S and the leader of the U. S rise and yields and pull up yields abroad. This is great for the banking systems. And as many of you know, European companies depend on their banks, they don't have much of a debt capital market. And as a result, bank health equals corporate health and so many cases. So, this Change in the situation in US with, and now, Republican clean sweep to the degree we become more stimulative in this country, greater fiscal spending that's targeted, corporate tax cuts. The ramifications abroad are very positive. And we see this in the In the recent, really strong rally overseas in bank stocks. This has happened in Japan, where the ten year bond has gone to zero. Zero sounds like nothing. To them, zero is awesome cuz it's [ UNKNOWN ] of negative 20 basis points only, about two months ago. And of rising yields abroad. They continued, those bond yields continued to rise. And as that upward- sloping hill curve really benefits the financial institutions, it precedes a really important, and I'd say greater state of health for Europe. And so the stocks, as they always do, they're already anticipating this. The only part of the world that's a little bit uncertain now is the emerging world and part, due to the very strong US dollar. And are you, yourself in a causeway fairly heavily invested in the emerging markets? We are, we have clients in the fun dedicated to the emerging markets and we think of them as a Separate asset class in the developed. They tend to have more top down features. So for your readers familiar with top down, that'd be more of a country, macroeconomic element. One has to take into account when understanding them making an investment as well as the valuation of both the industry and the company themselves. [ UNKNOWN ] Please go ahead Christian. Couple of comments regarding what she was saying. One, emerging markets maybe slightly under pressure at the moment, because of Trump policies, or expectation of Trump policies, and things like that. But from a longer- term perspective, if If you have a five, 10, 20 year view. If emerging markets don't work, developing markets don't work either. At the end of the day, emerging markets are going to be the primary source of global growth. They are today. And they will remain the primary source of role of growth for the foreseeable future. So I think merging markets may come up to pressure but if a merging market growth slows down meaningfully, develop market growth will follow that so people have to keep that in the back of their mind. The second point is. While emerging markets maybe somewhat country oriented, we think the best approach to take with respect to emerging market is really more about companies than it is really about countries. What do I mean by that? Mm- hm. That is, instead of allocating one into China. What do you really want to do is allocate money to fast growing companies in China. So if all you do is allocate let's say to a pool that invest across the board in the Chinese Markets. The bulk of the assets that you'll end up purchasing are Chinese state- owned enterprises, Chinese steel companies. Those companies are not going to be fast growers. These are companies that are among the top, 10 or 20 on the fortune global 500 .>> Absolutely and banks for that matter who have tremendous MPOs what you really want are the Chinese tech companies. Tech is growing as fast in China if not faster as it is in the U. S in certain sectors. So to us International investing, emerging markets investing for sure is really about picking the best, fastest growing companies in those countries rather than blindly allocating to countries. What are some of the companies that really stand out in your mind that a Western investor might recognize by their brand name? So we think companies like Alibaba, Ten Cent, companies in India like HDFC, ICICI. A couple of oil companies in In Russia, some logistics companies, grocery distributors in Russia. There's a whole slew of companies that are quite fast growing, even in some sectors that themselves are really not growing that fast. Again, it's really about companies far more than countries or sectors. Sure, sure. Heather, you were about to comment on the same idea. I agree with many of those comments. I do think we're gonna see some near term volatility based on rates and the dollar in the US. I think the emerging market opportunity is certainly About the new economy in many of these countries. The consumer and the emergence of technology. What I wanted to share at Goldman Sachs, we have a portfolio evaluation tool. And we've looked at thousands of portfolios of U. S. investment managers and one of the things that we see very consistently, is that many are underweight emerging markets. And so of these portfolios the average allocation to Is about 3 %. And if you look at an optimal balanced model, we would suggest higher to 9 or 10 %. And so that familiarity bias, that home bias I think, is particularly acute in US investors and may be missing some of the diversification benefits that emerging markets as an asset class can bring to their portfolio. [ SOUND ]