Show notes

The Investment Intelligence Podcast: Investing in non-US stocks amid rising geopolitical risk

Host: J.P. Vicente, Head of US Marketing & Client Engagement at Allianz Global Investors
Featured guests: Marcus Morris-Eyton, Growth Equity Portfolio Manager and Christian McCormick, Senior Product Specialist, both at Allianz Global Investors

Notes, quotes and references:

Marcus and Christian talk with J.P. about investing in international stocks outside the US as geopolitical tensions have risen following Russia’s invasion of Ukraine, the impact of monetary policy conditions on equity markets from Europe to China, the growth-to-value rotation, and the importance of fundamental research and taking a long-term investing perspective, especially in times of market turbulence

Some key thoughts and topics from this episode:

Marcus, how should investors interpret the rough start to 2022 in equity markets?

“Almost all markets are down in absolute terms this year, but what that doesn't necessarily show is the huge performance dispersion we've seen both at a regional level, but also within particular markets.”

Christian, what impact is the withdrawal of monetary policy support having on equity markets?

The liquidity from monetary policy has been the equivalent of, when fishing, “dropping a lot of dynamite into the water: It explodes, all the fish float to the top and you have your pick ... Now, it's not as if the fish are no longer in the pond or the lake, it just means you have to work a lot harder and employ more techniques to actually find them. Some of the longer-term associations with good investments—such as fundamentals, quality, corporate governance—are going to start to come to the fore versus just being able to pick something off the shelf and it will probably go up a lot.”

Christian, how should investors view rising geopolitical risk?

“Quantifying geopolitical risk can be extremely difficult because the situation can be fluid and a lot of it may just be hyperbole and qualitative in nature. So, you need to tread carefully and just try to bring it down to that individual investment decision … What is the makeup of this country's equity market? What are the sectors that are driving it? What is a company’s ability to mitigate these risks or pass along these risks? How fundamentally strong are they outside of incorporating this risk? And then bringing it down to that pros-and-cons decision on a company-by-company, sector-by-sector and equity-market-by-equity-market basis.”

Marcus, how should investors view the debate about whether to rotate from growth to value?

“The differences are often exaggerated because every growth investor should be valuation disciplined. Equally, many value investors are forecasting the future growth potential of a business when trying to discern the valuation for that particular stock … What's much more important over the longer term … is to invest in great companies. There are great companies within the value universe and within the growth universe that are able to structurally grow their earnings and cashflows over the long term.”

The full episode has even more details on the topics above. Check it out.

Cultural recommendations:

J.P. recommends Joy Williams's 2019 release Front Porch, her second solo album since splitting from the duo The Civil Wars. NPR called the album’s songs “an inquiry into the very meaning of home, and the place it can occupy between abiding in gratitude and straining toward desire.”

Marcus recently vacationed in Cape Town, calling the city—famed for its penguins, vineyards and Table Mountain—among his favorite places anywhere. Christian has been reading the novel Termination Shock by Neal Stephenson, a dystopic view of a world where climate change causes superstorms, rising sea levels, global flooding, merciless heat waves and virulent, deadly pandemics.

Creativity and editing: Peter Lennox.
Production: Mark Egan.