Innovation Knows No Bounds. Neither Should Your Investments
International stocks have dominated capital market returns so far this year, prompting investors to pour nearly $75 billion into non-US equities through September 30, according to Morningstar. Yet, the case for overseas investing hinges on a longer-term rationale: Broadening your investment horizons opens up a world of opportunity.
MORE TECH, LESS COMMODITIES
Currently, non-US companies across both developed and emerging markets together comprise 48% of the global stock market—a figure that is more likely to trend up than down. But sheer numbers only tell half the story. The types of companies thriving overseas are changing, too.
Take the developing world, where technology has overtaken commodities as the engine for profits. In 2006, 30% of the MSCI Emerging Market Index was comprised of energy and materials stocks. By 2016, that number had been cut in half. On the flip side, the percentage of technology companies in the index has nearly doubled over the last 10 years. And, technology firms now comprise six of the 10 largest companies in the index, by market capitalization.
HIGHER ADOPTION RATES ABROAD
While most people think of Silicon Valley as the cradle of new ideas, innovators are plentiful overseas. In fact, research and development spending as a share of GDP is 50% higher in Israel and South Korea than in the US.
Plus, in some regions, consumers are adopting technology more rapidly than here at home. Developing-world countries and companies are rapidly becoming Internet trendsetters—especially in online retail and digital payments. In some countries, the lack of a developed retail infrastructure actually proves to be an asset for e-commerce leaders.