We had the pleasure to meet one on one with a large institutional investment company and their international investment team. The investment team travels the world, primarily based in Europe, looking for opportunities to invest in. He spoke specifically about Europe, the markets there beginning to reach a higher growth level, unemployment numbers improving, and real estate prices zooming back to where they were pre-recession. Quite similar stories to here in the U.S. International stocks are still providing some opportunities for growth, even after a blockbuster year in 2017.
Finding the winners will require a bit more work as PE ratios and stock prices soar to new highs. To accommodate this research, there is a small shift taking place, moving from growth to value, and from large cap to small cap on the international side. The equity team that manages this large international fund discussed the investment changes being small, possibly a 2-3% change in the overall asset allocation, as growth at some point will peak, pause, and slow down. At this transition in the business cycle, value companies will be more in favor than growth companies. The same with small cap international was discussed. The team is beginning to overweight small cap stocks, with the thought that the valuations are better than the large cap stocks and may benefit from the U.S. and foreign political events, tariffs, and other government regulation changes.
These are hints that give us insight to market cycles, changes to our asset allocations, and why we diversify between multiple types of investments. The ability to meet one on one with large institutional investment firms gives us direction in taking care of our clients’ nest eggs.