Oxford Economics makes the case for increasing exposure to non-US assets, arguing that global diversification may be more important as US valuations and concentration risks remain elevated. The paper points out that the US accounts for over 60% of global equity market cap despite representing a smaller share of global GDP, raising questions about sustainability.
Strategic Asset Allocation | December 2020 The case for outperformance of non-US assets
Oxford Economics
Research
12 Pages
Key Takeaways
Valuation Gap Widens: US equities trade at roughly 30x earnings versus ~18x for non-US markets, implying a significant relative valuation premium.
Global Growth Rebalancing: Non-US economies are expected to contribute over 70% of global GDP growth over the next decade, shifting the opportunity set.
Currency Tailwind Potential: A 10–15% USD depreciation historically boosted non-US equity returns by 5–8% annually for US-based investors.
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