Chaos in US markets means investors should buy up international stocks, RBA says
Thomson Reuters
- Investors should buy up international stocks as US markets offer more trouble ahead, RBA said.
- The investment manager pointed to recent volatility stemming from the collapse of Silicon Valley Bank.
- US stocks could cost nearly double that of international stocks, the firm estimated.
Chaos in US markets means investors should buy up international stocks, Richard Bernstein Advisors said.
"With the volatility in global equity markets hits year, it may be comforting for investors to focus solely on US markets. However, it may be riskier to be geographically myopic now," RBA analyst Matthew Poterba said in a note on Wednesday.
US banks have suffered a steep sell-off following the failure of Silicon Valley Bank, leading commentators to warn of tighter credit conditions that slow the economy and weigh on stocks.
The Fed's aggressive pace of tightening has also resulted in the largest yield-curve inversion out of any developed country, RBA noted. Meanwhile, the US market has a higher exposure to rate-sensitive tech and growth stocks compared international markets.
Those factors suggests investors need to branch off into non-US stocks, Poterba said, pointing out that consumer discretionary stocks lost 38% in the US in 2022, but fell 21% in Europe.
"International markets trade at a huge discount to the US," Poterba said, estimating that US stocks could cost nearly twice as much as non-US stocks, for less growth. "US markets still appear stubbornly ignorant of risks within the US," he added.
Other market commentators have warned of risks to US stocks as investors continue to ride a wave of volatility.
Legendary investor Jeremy Grantham predicted a painful recession ahead that could cause US stocks to tank 50%, and market expert Stephanie Pomboy warned of a 30% crash as the bubble in asset prices has burst.