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Advisors debate whether international equities still have room to run
Thornburg’s Josh Rubin said most major allocators target 25% to 40% international exposure and pointed to about $3 trillion in excess cash in U.S. money market funds as a potential source of future flows.
ETF Trends reports that, in an August 20 webcast focused on international equities, half of the participating financial advisors said they are still underweight international stocks, while 42% said they are already sufficiently diversified. Only 9% said they were not convinced the international rally will last.
According to remarks shared during the event, Josh Rubin of Thornburg Investment Management said most major asset allocators recommend putting 25% to 40% of client assets outside the U.S., a level he linked to the U.S. share of global GDP and corporate earnings. He also noted that U.S. money market funds hold about $8 trillion in assets, with roughly $3 trillion characterized as excess cash on the sidelines.
Rubin argued that modestly rising inflows to international markets over the past 18 months suggest international buyers may be relatively early rather than crowded. He added that past U.S. stock returns have tended to be weak over the following five years when valuations looked similar, citing a S&P 500 price-to-earnings pattern tracked monthly since 1990.
The outlet also said Rubin pointed to currency as a factor, estimating about a third of U.S. market outperformance from the 2010s through 2022 came from a strengthening dollar, while the dollar weakened between 2% and 10% last year. Thornburg highlighted the Thornburg International Equity ETF (TXUE) and the Thornburg Premium Income Builder ETF (THOR) as vehicles tied to the international value and income themes discussed on the webcast.
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