International Equities: Poised for Recovery

The post-global financial crisis (GFC) dominance of US equities has been completely unprecedented.

Across numerous valuation metrics, international equities are near the cheapest relative to US equities they have been in roughly two decades.

There are many reasons why US equities have so dramatically outperformed, but the core explanation has to do with monetary policy. In response to the GFC—and then to the European sovereign debt crisis in 2011, the “taper tantrum” in 2013, “Volmageddon” in 2018, and the COVID-19 crisis in 2020 (to name a few recent episodes)—central bankers flooded the financial system with liquidity by pinning down interest rates and entering bond markets with the equivalent of a blank check.