Historically, when long-term inflation expectations are rising, it has led international stocks to outperform U.S. stocks. International markets tend to be more inflation-sensitive, with more companies that benefit from higher inflation than those that suffer. While there can be no guarantees, international stocks have been outperforming in recent months.
Shorter-duration stocks can help manage the risk of rising rates. In other words, stocks with more immediate cash flows, rather than cash flows in the distant future, tended to outperform after rates bottomed in 2020, and are more dominant in international markets.
Economic uncertainty may have peaked in the first half of 2022, but it remains high. Having a well-balanced, diversified portfolio, with a risk profile consistent with your goals, and being prepared with a plan in the event of an unexpected outcome are keys to successful investing.
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