International Diversification Effect
For many global oriented asset allocation investors, 2017 so far has been an interesting year. To begin with, at the beginning of the year, we were very concerned about US stocks’ valuation. We have indicated our uneasiness on this for quite some time. In fact, if one looks at the time the long term valuation based portfolio P Warren Buffett Total Stock Market Valuation to GNP Ratio SO SU Weekly Strategy Total Return Bond Funds As Cash went into ‘cash’ or bonds, it was in December 2014. So 2 and half years and going.
On the other hand, many good investment managers such as PIMCO All Asset’s Rob Arnott were steadfast to point out that emerging market stocks and international stocks were much undervalued, compared with US stocks. So these funds maintained or overweighed their exposure in these stocks. This has proved to be very effective. Thus far, the international diversification again proves its mantle in asset allocation.
US stocks lagged this year
As much as investors are happy with stock returns this year, it turns out US stocks have lagged behind foreign stocks:
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