The long-standing dominance of U.S. equity markets has shaped many investors’ capital allocation strategies for nearly a decade, creating a widespread reliance on single-market concentration. However, recent market performance reveals renewed strength across international equity markets, with meaningful dispersion among regions, says David Legeay, Managing Director at Glenmede. This is presenting opportunities that investors should evaluate within properly diversified portfolios.
“To navigate this shifting terrain, investors should look beyond recent U.S. market leadership and evaluate the structural and cyclical factors supporting select non-U.S. markets,” he says. “Understanding these rotational patterns, pairing broad exposure with selective active management where inefficiencies exist, and choosing appropriate vehicles, can support long-term portfolio resilience and growth.”
Smart Business spoke with Legeay about how macroeconomic tailwinds and market cyclicality are making the case to expand capital allocation beyond U.S. markets.
What’s driving the resurgence of international markets?
A major driver is the revitalization of industrial and manufacturing sectors across non-U.S. economies, accelerated by shifting trade policies and regionalization. In European markets, evolving fiscal priorities around defense, infrastructure and industrial policy have led some governments to increase spending. This spending shift may support specialized defense and industrial ecosystems and contribute to earnings growth for select regional enterprises.
Simultaneously, currency movements can materially influence total return for U.S.-based investors. A weakening U.S. dollar can create a translation tailwind for unhedged foreign equity exposure, while a strengthening dollar can be a headwind. Beyond Europe, select markets, including India and Japan, are benefiting from distinct drivers, including structural growth, corporate governance reforms, and regional capital flows.
How should investors navigate foreign asset classes?
Foreign equity markets often exhibit thinner analyst coverage and greater pricing inefficiencies than U.S. markets in some areas. Differences in regulatory frameworks, information distribution and corporate governance standards can create market friction. These gaps may offer active managers opportunities to identify mispriced securities where they have strong local research capabilities.
To capture these opportunities, investors can deploy a calibrated combination of passive and active investment strategies. For example, index funds and exchange-traded products offer efficient, broad-market exposure to foreign equities, establishing baseline beta while maintaining liquidity. Additionally, specialized asset managers seek to capitalize on localized market inefficiencies, utilizing deep research capabilities to identify mispriced securities in emerging sectors.
Foreign market investments can introduce currency, regional and sector diversification. Correlations with U.S. equities can rise during periods of market stress, but less-than-perfect correlations, combined with different currencies and economic drivers, may help reduce single-market reliance while expanding the opportunity set.
Who can help with global capital deployment?
Expanding into foreign asset classes requires rigorous oversight and institutional expertise. Investors should evaluate advisory partners based on demonstrated experience in portfolio construction and cross-border risk management. Because research and due diligence costs are inherently higher for non-domestic assets, advisers should support vehicle selection with disciplined manager due diligence, cost analysis and clear risk-adjusted performance expectations.
By establishing a structurally balanced global footprint, investors improve the likelihood of participating in capital appreciation wherever it emerges, while helping portfolios better withstand localized market downturns and remain positioned for long-term resilience. ●
This article presents general information and is not intended to be financial, investment, tax, legal or other advice. It contains information and opinions which may change after publication. Views expressed herein do not necessarily reflect the views of the author’s employer. No outcome, including performance or tax consequences, is guaranteed, due to various risks and uncertainties. Readers should consult with their own financial, tax, legal or other advisors to seek advice on their individual circumstances.
INSIGHTS Wealth Management is brought to you by Glenmede.
