If you’re underweighted in the international sector, you are typical of many advisors and investors. And this would be a good time to reconsider, according to a panel at a Legg Mason conference in Manhattan on Thursday. Reversion to the mean of this beat-up sector is now likely to take place, panelists predicted.
Last year the international investing sector had strong gains, but panelists conceded that this year those gains had been wiped out and then some. Still, a trio of money managers said that they remained optimistic that a turnaround is coming because the fundamentals favored international stocks.
“Their recovery is very much at hand,” according to Elisa Mazen, head of global growth and a portfolio manager at ClearBridge Investments.
Mazen blamed currency issues along with Argentinean problems for the recent problems in international investing. But, she added, owing to financial reforms that had been put in place since the 2008 crash, economies are performing better.
“There really is a lot to look forward to, including pro-growth policies that have been put in place in Spain, Portugal and France,” Mazen said. Wage growth, she said, is now starting in those markets.
She added that the European banking system “is in really fine shape now.” This will mean that lending growth will be strong, she added. “So there are a lot of really good growth components that are in place.”
Mazen said “positive” structure changes are also taking place in Japan.
Emerging markets are also primed for strong performance, added Andrew Mathewson, a portfolio manager for Martin Currie Investment Management.
“The fundamentals are actually slightly improving this year,” he said. Mathewson asserted that the problems of Argentina and Turkey “are isolated incidents.”
“Emerging markets will grow faster than other markets for a number of reasons,” Mathewson predicted. “Emerging markets are a significantly stronger asset class than they were a decade ago.” He noted despite the coming asset growth, “emerging markets offer a 50 percent pricing discount to developed market equities.” He said that discount is at a historic low.