JACK McMANMON: For our Q2 investment outlook for advisors, I’m Jack McManmon, with two minutes on international equity opportunities for your clients.
As we start the second quarter, the backdrop for international equities look favorable, thanks in part to the European Union’s pro-growth, fiscal, and monetary policies, combined with a relatively small exposure to US exports. When talking with clients about international equities, here are three points we think are worth highlighting.
Point number one, international stocks by their nature provide exposure to non-US stocks, but they also provide very different sector exposures. Technology alone accounts for 39% of the S&P 500 Index’s revenue, but for international markets, it’s less than half that amount, and leading sectors are financials and industrials.
Point number two, despite the recent year rallies by international equities, they still trade at meaningful discounts to US stocks, particularly to US large-caps. This is a key reason Schwab’s 10-year return forecast for international large-cap, small-cap, and emerging market equities are higher than what we currently forecast for US large-caps.
Point number three, implementation has never been easier, and the key elements we seek in our portfolio construction approach—transparency, cost efficiency, and diversification—have improved dramatically over the years.
In international equities, investors had never had more opportunities. Perhaps you would like your clients focused on quality companies with a consistent history of paying dividends, or profitable companies with strong balance sheets, or broad low-cost exposure to the entire developed international equity market, Schwab Asset Management has many solutions to investing outside the US.
If you have any questions about international allocations or positioning in your client portfolios, please reach out to us for a complimentary portfolio evaluation. Thanks for watching.
Disclosures
Past performance is no guarantee of future results, and the opinions presented cannot be viewed as an indicator of future performance.
Investing involves risk, including loss of principal. The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Data contained herein from third-party providers is obtained from what are considered reliable sources. However, its accuracy, completeness, or reliability cannot be guaranteed. Examples provided are for illustrative purposes only and not intended to be reflective of results you can expect to achieve.
International investments involve additional risks, which include differences in financial accounting standards, currency fluctuations, political instability, foreign taxes and regulations, and the potential for illiquid markets.
Diversification strategies do not ensure a profit and do not protect against losses in declining markets.
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