International Equity

8 min read | It was a strong quarter for risk assets, with robust gains for equities, tightening high-yield credit spreads, rising oil prices, and a spike in cryptocurrencies. The global economy, led by strength in the US, has demonstrated impressive resilience following sharp interest rate hikes, as economic data generally surprised to the upside. Meanwhile, inflation has moderated but it remains well above levels experienced in recent decades. The resulting "soft landing" narrative, expectations for interest rate cuts, and continued excitement surrounding AI have fueled a powerful global equity rally.

8 min read | International Equity markets delivered strong gains in 2023, climbing 18.2% for the year and 10.4% in the fourth quarter, as measured in US dollars. These gains marked a reversal of 2022's dismal market performance (-14.5%), as animal spirits returned with vigor. 2023 concluded with the VIX near multi-decade lows, bitcoin up over 150%, global high-yield bond spreads near 15-year lows, and equity investor bullishness near all-time highs.

6 min read | by Rich McCormick | I recently spent two weeks traveling in Japan, meeting with leaders across a range of industries, from banking to real estate to industrials to technology. Over the past several decades, our team has visited the country consistently, helping us find many “diamonds in the rough.” We have noted positive – albeit slow – developments across the corporate landscape, particularly over the past several years. Increasingly, I have heard investors speaking of enormous change underway in Japan, but my trip revealed a more nuanced story of continued incremental progress rather than radical change.

9 min read | The Altrinsic International Equity portfolio declined 2.1% (-2.4% net) during the third quarter, as measured in US dollars, compared with declines of 4.1% and 3.8% for the MSCI EAFE and MSCI All Country World ex-US indices, respectively. Outperformance came amid volatility in stock, bond, currency, and commodity markets, as markets and economies are grappling with an environment transitioning from one flooded with free money to one of rising nominal and real interest rates. This transition, coupled with significant uncertainty around growth, inflation, regulation, technology competition, and government policy, contributes to elevated risk in markets. We believe these factors should support a broadening out in markets with greater attention paid to quality, valuation, and risk.

5 min read | The valuation case for international equities is among the most compelling we have seen in years, but this is only part of the story. The conventional wisdom is that non-US equities are cheap for good reason and that international stocks are either low-growth or high-risk, but fundamentals are stronger than many investors perceive. In this paper, we discuss the underappreciated case for investing in international markets, built upon several timely and compelling themes.

7 min read | International markets experienced more modest and broad based returns than global indices, where a narrow subset of highly priced US growth stocks (or anything related to AI) skewed benchmark performance. Europe remained pressured by an uncertain economic recovery and war in the east, while Japan performed well in local currency terms, offset by yen weakness. A sluggish recovery in China weighed on emerging markets. What really captured the headlines were “all things AI.” AI is a significant technological innovation, but we believe it is being greatly overhyped and overestimated in the short term, as is typically the case with new technologies. Stock prices for leading “AI stories,” primarily in the US, discount growth rates that will be difficult to achieve, thus impairing their underlying margins of safety. We see greater opportunity among companies throughout the world that are embracing AI in their operations to enhance their business quality and efficiency, most notably in health care, non-life insurance, exchanges, global consumer franchises, industrials, and business services, to name a few.

8 min read | by Rich McCormick and Elijah Crago | Investor pessimism on the ground in Brazil has reached an extreme relative to the past decade – but where negative sentiment exists, there may also be value. The return to power of a leftist president, anti-business rhetoric, and interest rates back at decade highs have turned many investors away altogether – resulting in some of the lowest valuations in the world. Upon returning from a recent two-week trip to Brazil, we are excited by the investment opportunities emerging in the country.

10 min read | Equities delivered strong gains during the first quarter as investors shrugged off two of the three largest bank failures in US history and the collapse of once venerable Credit Suisse. The proximate cause for the rally is a belief that inflation risk is vanquished, interest rates have peaked, years of extraordinary financial stimulus can be normalized painlessly, and the global economy will not experience a downturn. This implies a tremendous amount of confidence in policymakers.

In light of the significant developments in the US and European banking industry, we wanted to provide a brief update on our exposures, share some thoughts, and offer some issues to consider.

10 min read | Global markets recovered strongly during the fourth quarter, aided by falling inflation expectations, optimism that the US Federal Reserve would move away from aggressive policy tightening, an improved energy outlook in Europe, and President Xi’s unexpected decision to unwind zero-COVID policies. The rally was certainly welcomed, but 2022 was the most challenging year since the global financial crisis. According to Michael Howell of CrossBorder Capital, global investors lost US$23T of wealth in housing and financial assets in 2022, equivalent to 22% of global GDP and greater than the US$18T of losses suffered in the 2008 financial crisis. Commodities were the only refuge, as long-term bonds had their worst year since the 18th century (according to the Financial Times) and and equities fell 18.1% in 2022 (MSCI World Index), as measured in US dollars.