Outlook 2021: Focus on International

Markets Blog Posted by lplresearch


This week we released Outlook 2021: Powering Forwardwith our 2021 market and economic views.

In the past several Outlook publications, we have favored the United States over developed international in equity allocations (international developed markets are composed primarily of Europe and, to a lesser amount, Japan). Each time we settled on those views, and as valuations for stocks outside the United States got relatively cheaper, we had thought we might be getting closer to an eventual sustainable rotation. But we didn’t get there. It’s been like taking a road trip with the kids and hearing, “Are we there yet?” too many times.

Continue to Favor the United States

This year is shaping up in a similar way. We continue to favor US equities over their developed international counterparts, as we noted in Outlook 2021, even though the valuation gap between the US and these international markets has widened further over the past year.

But as we look ahead, we can envision a scenario at some point in 2021 when markets may respond to a coordinated global economic expansion after the developed world gets through the pandemic. A weaker US dollar may help. Japan may get a boost from the massive amount of fiscal and monetary stimulus the Japanese government and the Bank of Japan have implemented to boost its economy. A rising tide may lift all boats—including those that have not been the strongest in recent years. We simply think now is too early to make that shift in a meaningful way.

Favorable Emerging Markets Outlook

The outlook for emerging markets stocks looks better to us as 2021 approaches. This asset class is made up mostly of Chinese equities but includes several other Asian, European, and Latin American countries that index-provider MSCI classifies as emerging or developing.

“We expect emerging market economies to lead the global economic rebound in 2021,” said LPL Financial Chief Market Strategist Ryan Detrick. “We believe growth in international developed economies may lag behind the United States, although a strong fiscal response may help Japan.” LPL Research forecasts global gross domestic product (GDP) growth in the 4.5–5% range in 2021, as shown in the LPL Chart of the Day.

View enlarged chart.

For more of our 2021 market insights and forecasts, please read our new LPL Research Outlook 2021: Powering Forward.


This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal. Any economic forecasts set forth may not develop as predicted and are subject to change.

References to markets, asset classes, and sectors are generally regarding the corresponding market index. Indexes are unmanaged statistical composites and cannot be invested into directly. Index performance is not indicative of the performance of any investment and do not reflect fees, expenses, or sales charges. All performance referenced is historical and is no guarantee of future results.

Any company names noted herein are for educational purposes only and not an indication of trading intent or a solicitation of their products or services. LPL Financial doesn’t provide research on individual equities. All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.

All index and market data from FactSet and MarketWatch.

This Research material was prepared by LPL Financial, LLC.

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