International stocks to provide a hedge against rising inflation – JP Morgan
|Internationally, leaning into financials, materials and industrials is a way to position portfolios for the global recovery and to hedge a potential overshoot in inflation, according to Gabriela Santos, Global Market Strategist at JP Morgan.
See: S&P 500 Index climbs above 4,000, further upside ahead – UBS
International earnings set to soar as nominal growth surges
"The pandemic’s initial effects proved to be disinflationary, as demand for services and commodities plunged. This year, pent-up demand is set to be unleashed, fueled by the reopening of activity and fiscal stimulus. As the global economy operates above potential, inflation should move higher. While the debate will continue as to whether a structural shift has taken place, the cyclical uptick in inflation should lead to a surge in nominal economic growth.”
“Corporate earnings growth should be strong, with consensus expecting 35% earnings per share growth for the MSCI All Country World ex-US index in 2021. This compares with expectations of 25% growth for the S&P 500. The greater cyclicality of international markets explains the difference: cyclical sectors make up 57% of international markets versus only 38% of the US. It is exactly sectors such as financials, materials and industrials whose earnings are the most geared to nominal economic growth.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.