Investors Urged to Increase International Exposure Amid US Market Strength
Despite the US stock market hitting record highs, investment experts are advocating for greater exposure to international markets. This comes as the Dow, S&P 500, and Nasdaq all recorded weekly gains of approximately one percent, while emerging markets outperformed with nearly a 3% weekly rise. ETF.com’s President and Director of Research, Dave Nadig, emphasized the persistent “home bias” among US investors, who disproportionately allocate assets domestically, potentially missing out on lucrative opportunities abroad.
“Home bias is about as bad as it’s ever been in the United States. The average investor has far too much of their money sitting in the United States,” Nadig told CNBC’s “ETF Edge.”
Nadig highlighted the appeal of international exposure, whether through targeted country funds or broad global ETFs, noting increasing investor and advisor interest. He specifically pointed to China as a market with significant long-term potential.
The iShares MSCI Emerging Markets ETF recently closed at a 52-week high, reflecting nearly 3% gains in a single week. This performance contrasts with the steady but slower growth of the major US indices. Kevin Carter, Founder and CIO of EMQQ Global, which manages ETFs focusing on emerging market internet and e-commerce companies, also supports international diversification. His Emerging Markets Internet ETF has soared 35% year-to-date, underscoring the sector’s explosive growth. Although the India Internet ETF is currently down 3% this year, Carter remains bullish on India’s long-term prospects.
India’s Demographic and Economic Momentum
India’s NSE Nifty 50 index has returned 5% this year, lagging behind US markets. However, its five-year performance has been impressive, surging by 118%.
“You now have the largest population, you have the best demographics, you have the fastest growth in the world, and that’s driving consumption,” Carter said. “That’s the same thing we saw in China over the last 20 years.”
According to the International Monetary Fund, India’s GDP growth is projected at 6.2% for 2025, positioning it among the fastest-growing major economies globally. This year, India overtook Japan to become the world’s fourth-largest economy by GDP.
FinOracleAI — Market View
The prevailing US market rally, while impressive, masks growing value and growth opportunities in international and emerging markets. Persistent home bias among US investors risks missing out on these prospects, especially in dynamic economies like China and India.
- Opportunities: Access to faster-growing economies, particularly in Asia; exposure to emerging technology and e-commerce sectors; diversification benefits reducing overall portfolio risk.
- Risks: Geopolitical tensions, currency fluctuations, and regulatory uncertainties in emerging markets may impact returns.
- Strategic Consideration: Allocating a portion of portfolios to targeted international ETFs or country-specific funds can enhance growth potential while managing risk.
Impact: Increasing international exposure is a prudent strategy to capitalize on global growth trends and mitigate concentration risk in an overbought US equity market.
