TIME TO EXPLORE INVESTMENTS ABROAD

Use our international picks to broaden the reach of your portfolio

- NELLIE S. HUANG

International stocks: Why bother? For the greater part of the past decade, it hasn't paid to invest abroad. U.S. stocks beat their over- seas counterparts in eight of the past 10 calendar years. It's little wonder that many investors now avoid foreign stock markets. "Our clients see international investing as a greater risk," ignoring any diversification benefits the asset class may provide, says Lewis Altfest, chief executive of Altfest Personal Wealth Management.

But it may pay to bother now. The stars are aligning for foreign shares. Inflation is easing, for a start, in much of the developed world and some emerging countries. "A lot of last year's headaches-higher inflation and rising interest rates-should subside throughout this year," says Nicole Kornitzer, manager of Buffalo International, "so the big question is how much of those rate hikes will flow through and cause a recession" and how bad the downturn will be.

But the economic outlook this year may not be as gloomy as economists once thought. Though the International Monetary Fund expects global growth to slow to 2.9% this year, down from an estimated 3.4% in 2022, many market strategists and economists think that in certain key markets, particularly the eurozone, any recession will be shallower than originally expected. Some say Europe may avoid a recession entirely.

What's more, foreign shares are cheap cheaper than they have been in 15 years relative to U.S. stocks, according to some calculations. Of course, "you could have made the same observation anytime over the last two years, and still, international markets didn't outperform," says Jed Weiss, a Fidelity international-stock fund manager. "But starting points matter. They were cheap two years ago and they're even cheaper today." The dollar is weakening, too, which can be a boon for emerging markets.

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