The case for seeing equities as one global beta is compelling if you’re looking out over very long time frames. But in the shorter term, perhaps even as long as 10 or 20 years, the rationale for making geographic distinctions is persuasive. Why? The answer begins by recognizing that valuations differ, as do trailing returns, throughout the world at any given time. As a result, expected returns vary, sometimes by quite a lot among the regional components that collectively make up the global equity market.
Add in the fact that different investors have different risk tolerances, investment horizons and financial situations and you’re looking at a persuasive argument for adjusting global equity allocations through time to match your particular outlook and personal outlook.
With that in mind, comparing recent performance among the world’s major equity regions offers some ideas about how the future may unfold, with an emphasis on “may.” We go into a bit more detail about our thoughts in the soon-to-be published July issue of The Beta Investment Report.