International Equity Commentary | 2Q 2023
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.