2020 Mid-Year Outlook: International Equities

Timely insights from portfolio managers and industry experts on key financial, economic and political issues.

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      By Christopher M. Dyer, CFADirector of Global Equity, Portfolio Manager, Eaton Vance Advisers International Ltd.

      London - Multiple factors, including greater European cohesion, favor international equities.

      We think now is a very interesting time for investors to consider international equities. From an economic, political and valuation perspective, there are many factors that can drive outperformance of international equity versus the US market.

      From an economic perspective, we think that we're at the early stage of an economic recovery, which would favor the cyclical and value-oriented companies that we see in Europe and in Japan.

      From a political perspective, we believe it's likely that ahead of the election in the US in November, we're going to see more volatility in the US equity market as investors price in the possibility of a democratic sweep of the White House, the Senate and the House of Representatives. That would lead to the higher probability of increased corporate tax rates and lower corporate profits in the US.

      On the other hand in Europe, we're seeing greater cohesion, and this is best exemplified by the European Recovery Fund, which has been proposed with collectivized debt at the European level, as opposed to individual states. That will be a very important factor in potentially driving down the equity risk premium in Europe, which has been elevated for the past nearly decade and has depressed the valuations of companies.

      These things all make us very optimistic in terms of the outlook of European and international equities.