International markets continue to offer opportunities to own high-quality, growing businesses at levels supportive of higher future returns. Investors enjoyed a recently rare taste of that as international stocks rose in the first quarter, outperforming the US market more this quarter than it has in 15 years.
Yet non-US stock markets still discount significantly higher required rates of return than the US, as evidenced in the chart above. And while the international index has been less growthy and trades at a much lower multiple than the US, there continue to be attractive high-quality, growing, non-US companies trading at significant discounts to US counterparts.
While there are policy risks and economic uncertainty for both US and non-US companies, we think the stock valuations of these kinds of businesses compensate investors for those risks. ∎