{"id":417742,"date":"2021-03-16T13:01:33","date_gmt":"2021-03-16T17:01:33","guid":{"rendered":"https:\/\/www.investmentexecutive.com\/?p=417742"},"modified":"2021-03-22T10:30:14","modified_gmt":"2021-03-22T14:30:14","slug":"international-markets-poised-to-outperform-u-s-in-2021","status":"publish","type":"post","link":"https:\/\/www.investmentexecutive.com\/soundbites\/economy\/international-markets-poised-to-outperform-u-s-in-2021\/","title":{"rendered":"International markets poised to outperform U.S. in 2021"},"content":{"rendered":"

(Runtime: 4:54. Read the audio transcript<\/u><\/a>.)<\/p>\n

International markets are poised to outperform U.S. markets over the next 12 to 18 months, says Vivek Gandhi of Putnam Investments.<\/p>\n

The London, U.K.-based portfolio manager said Europe and Asia are particularly well-positioned in sectors that are expected to thrive as the Covid pandemic passes, giving them an edge over the U.S.<\/p>\n

\u201cAs we go through this year and the demand recovery comes through, the goods you\u2019re going to consume, the things you\u2019re going to buy [are] mostly coming out of international markets,\u201d he explained.<\/p>\n

Gandhi said the U.S. is stronger in technology and health care \u2014 sectors that benefited from lockdowns and a pandemic. These sectors constitute 40% of the U.S. benchmark, and only 20% of the international benchmark.<\/p>\n

Conversely, the sectors expected to do well in the coming recovery \u2014 materials, industrials and financials \u2014 make up 40% of international benchmarks and only 20% of the U.S. benchmark.<\/p>\n

\u201cJust that mix effect is going to benefit international markets,\u201d he said.<\/p>\n

In addition to the sector advantage, international markets currently boast attractive valuations, he said.<\/p>\n

Europe, for example, which faced de-rating and earnings underperformance during Covid, is now discounted 20% on a P\/E basis \u2014\u202fwhich is more than its usual discount.<\/p>\n

\u201cAs the year progresses, and if my thesis comes true, you\u2019ll have earnings recovery, which is going to be faster given the exposure to a sector that that will benefit most from reopening, and you will also have some re-rating. So that will help Europe to outperform the U.S.,\u201d he said. \u201cAnd it\u2019s the same case with Japan.\u201d<\/p>\n

Add to that a turning tide of foreign flows into international markets, and the stage is set for a standout year for foreign economies.<\/p>\n

\u201cAcross global markets, monetary policies remain accommodative, fiscal policies are very supportive, and there is a successful vaccine rollout in progress. So, in my view, this is a triple stimulus,\u201d he said. \u201cThis is positive for the market and I believe it will be a good year for international stocks.\u201d<\/p>\n

Gandhi said he is drawn to high-profitability businesses, regardless of location. Among the companies he\u2019s particularly impressed with are:<\/p>\n