Acadian Asset Management explores the case for international equities and why persistent valuation gaps may create opportunities outside the U.S. The paper argues that non-U.S. markets have lagged meaningfully, yet improving fundamentals and lower valuations could set up a reversal. It challenges the idea that U.S. dominance is permanent, pointing to cyclical and structural drivers.
International Equities – Are They Still Worth It?
Acadian
Brian Wolahan
Research
7 Pages
Key Takeaways
Valuation Gap Expansion: International equities trade at roughly a 30% discount to U.S. stocks based on forward P/E, near multi-decade extremes that have historically preceded reversals.
Earnings Growth Convergence: Non-U.S. earnings growth is projected to outpace U.S. by about 2–3% annually, narrowing a decade-long profitability gap.
Currency Tailwind Potential: A 10% USD depreciation has historically added 5–7% to international equity returns, amplifying local market gains.
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