4 Global Trends To Bet On In 2019

The Best Values, From Europe To Japan.

- Rob Curran

WITH THE U.S. IN THE 10TH YEAR of a historic bull market, foreign stocks have been something of an afterthought for many investors.

It’s not hard to see why. China and other emerging economies have struggled with heavy debt and slowing growth, while in Europe, populist politics threaten to upend a decades-long trend toward greater economic integration.

But according to investing pros, neglecting foreign markets may be a mistake. While these stocks have lagged U.S. peers seven out of the past 10 years, in the long run, that pattern doesn’t hold. Going back to 2004, it’s effectively a toss-up—foreign stocks have led for seven years and the U.S.’s for eight.

“Performance—over long periods of time— actually tends to be pretty similar between the U.S. and international stocks,” says Kate Warne, investment strategist at brokerage Edward Jones. “But the leaders and laggards rotate.”

That mismatch may be frustrating when you log on to your account and look at your investment performance, but in the long term, it’s good news. It means that by owning both U.S. and foreign stocks, you can smooth your portfolio’s overall returns.

In fact, one recent study by fund firm Vanguard, which looked at different mixes of U.S. and foreign stocks over the past four decades, found that portfolios with roughly 30% to 40% in foreign stocks had the lowest overall volatility. If that seems like a lot, consider this: U.S. stocks account for only about 40% of the $79 trillion total value of all stocks worldwide, according to the World Bank.