Hi, I'm Martin Schulz, head of the International Growth Team at Federated Hermes.
Why should investors look to allocate toward international equities in this environment?
Well, at the end of the day, we've seen long-term cycles, international versus U.S. performance, and we've been on a 10-year tear, if you will, on U.S. markets, and so, from our perspective, we see some opportunity in international markets. If I think back when we first started in this business in the late '90s, international was out of favor. Very similarly, right now. And what happened is after the Nasdaq bubble burst, we saw massive outperformance by international relative to U.S. And so, valuations, growth, and honestly, opportunity sets are things to consider. But at the end of the day, we're finding the most opportunity, if you will, in the emerging markets, where we see some headwinds on the front of, obviously, commodity prices, but really tailwinds as it comes to demographics in growth.
Where are you seeing opportunities outside of the U.S. in 2020?
Well, interestingly enough, we've been investing in the emerging markets for over 20 years, and what we're seeing for the first time in a few years is a tendency to look at the markets in Latin America, in Singapore, and in the Middle East. So what that means is, we're actually getting out of Europe and Japan, and looking more into the emerging markets, where we're seeing better growth profiles, less risk, and better valuations.
What risks do you think could derail international investing opportunities?
Well there's always risks out there. Geopolitical risk, there's populism, there's obviously viruses that are popping up here and there, but at the end of the day, from our perspective, really, it's a function of a one-off, and for us, risks are part of the cycle. It's what we look at to invest when valuations are low, and to look for growth long term.
Disclosure: Views are as of 2/5/2020 and are subject to change based on market conditions and other factors. These views should not be construed as a recommendation for any specific security or sector. Past performance is no guarantee of future results. International investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards. Prices of emerging markets securities can be significantly more volatile than the prices of securities in developed countries and currency risk and political risks are accentuated in emerging markets. 20-40042 (2/20) Federated Global Investment Management Corp.