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2024 Global Market Outlook Midyear Update
International stocks still appear to be good value
International equities
Fueled by the outperformance of growth technology stocks, U.S. equities reached all‑time highs earlier this year, pushing their premium versus international (i.e., non-U.S.) stocks to 20‑year wide levels. International stocks remain favorably valued but are fundamentally more attractive in the post-COVID environment, as demonstrated by improved earnings growth in recent years. This is because, in contrast to the U.S. market’s heavy exposure to growth stocks, the international market is more exposed to value‑oriented sectors such as financials, materials, industrials, and energy, where we see secular support in the years ahead. The S&P 500 Index, for example, has a very different sector composition from the MSCI EAFE Index.
Supply chain diversification, infrastructure rebuild, defense spending, and the likelihood of higher energy prices should favor traditional value sectors as capital spending accelerates. As these sectors are currently cheaper and, in some cases, have a lower earnings bar than their U.S. counterparts, investors seeking diversification from large‑cap tech growth stocks may seek to increase their exposure to select international markets.
The MSCI EAFE Index is not an ex-U.S. S&P 500 Index
(Fig. 6) Sector weightings and valuations contrast sharply between the two indices
As of April 30, 2024.
Source: T. Rowe Price analysis using data from FactSet Research Systems Inc. All rights reserved. Please see Additional Disclosures page for more information about this Standard & Poor’s information.
These statistics are not a projection of future results. Actual results may vary.
P/E= price-to-earnings.
Improving corporate governance is driving Japanese stock performance
Of the international markets, we continue to favour Japan. Improved corporate governance standards continue to have a tangible—and considerable—impact on company performance. Shareholders are now a much higher priority in Japan than they were in the past. While the BoJ recently ended its negative interest rate policy, it is not expected to embark on ahiking cycle that brings Japanese rates in line with those of other developed markets. This should keep the yen relatively weak and Japanese exports competitive. Valuations are reasonably attractive, too—although the Nikkei 225 has climbed to within reach of its record high, Japanese stocks continue to trade at a low price‑to‑book value. However, investors outside of Japan will need to consider how yen weakness relative to other currencies will impact the value of their returns.
South Korea and Vietnam the pick of emerging economies
South Korea has sought to emulate Japan’s success in boosting stock valuations with a corporate governance drive. Tax incentives have been offered to businesses that prioritize shareholder returns, while the new “Korea Value-up Index” will list firms that have improved capital efficiency. Vietnamese stocks also appear cheap despite a cyclical recovery, an expanding consumer economy, and a looming upgrade to emerging market status. With corporations seeking to diversify their supply chains beyond China, Vietnam appears well placed to attract manufacturing capacity.
Nikolaj Schmidt,
Chief Global Economist
Ken Orchard,
Head of International Fixed Income
Peter Bates, CFA
Portfolio Manager, Global Equities
Tim Murray, CFA
Capital Markets Strategist,
Multi‑Asset Division
Global Market Outlook Midyear Update insights
2024 Global Market Outlook Midyear Update
How central bank policy could impact your portfolio
Asset Allocation
Investors moving out of cash may favour equities and short duration bonds
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Shifting market conditions will favour active management
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T. Rowe Price cautions that economic estimates and forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual outcomes could differ materially from those anticipated in estimates and forward-looking statements, and future results could differ materially from any historical performance. The information presented herein is shown for illustrative, informational purposes only. Any historical data used as a basis for this analysis are based on information gathered by T. Rowe Price and from third-party sources and have not been independently verified. Forward-looking statements speak only as of the date they are made, and T. Rowe Price assumes no duty to and does not undertake to update forward-looking statements. Where securities are mentioned, the specific securities identified and described are for informational purposes only and do not represent recommendations.
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