**

Adrian Mowat's Bullish Case: Why Global Equities Are Outpacing US Stocks and Bonds

The US equity market, long considered a safe haven and a primary driver of global investment, is facing increasing headwinds. Prominent investment strategist Adrian Mowat, known for his insightful market analysis, argues that the current macroeconomic climate makes non-US assets – particularly international equities – significantly more appealing than their American counterparts, including US Treasuries. This shift is fueled by several key factors, which we will explore in detail. Mowat's perspective isn't just a contrarian view; it reflects a growing sentiment among investors reevaluating their portfolio allocations in a world grappling with inflation, geopolitical uncertainty, and a changing global economic landscape.

This article will delve into Mowat's arguments, examining the underlying reasons behind his bullish outlook on international equities and exploring the implications for investors seeking diversification and higher returns in the current market environment. We’ll cover topics like: global equity markets, international diversification, US dollar strength, inflation hedging, emerging markets, value investing, and portfolio allocation strategies.

The Weakening Dollar and the Rise of Global Equities

One of Mowat's central arguments revolves around the weakening US dollar. While the dollar has shown periods of strength recently, a longer-term perspective reveals a trend of depreciation against other major currencies. This weakening dollar makes foreign investments more attractive to US-based investors, boosting the returns on international assets when converted back to dollars. This is particularly relevant when considering the significant weight of the US dollar in many global indices. Investors need to carefully consider the impact of currency fluctuations on their overall portfolio performance. Analyzing the USD exchange rate is crucial for making informed investment decisions in this context.

Inflationary Pressures and the Search for Yield

The persistent inflationary pressures gripping the global economy are another key driver in Mowat's analysis. While US Treasury yields have risen to reflect higher inflation expectations, many international markets offer potentially better returns and inflation-hedging opportunities. Emerging markets, in particular, are often viewed as a refuge from inflation because their economies may be less sensitive to interest rate hikes by the Federal Reserve. Mowat points to specific regions, highlighting the potential for significant capital appreciation in these markets. This includes analyzing specific emerging market ETFs and carefully considering the associated risks.

Geopolitical Risks and Diversification Strategies

Geopolitical instability continues to impact global financial markets. The war in Ukraine, tensions with China, and other regional conflicts have created uncertainty and volatility. Mowat argues that a diversified portfolio with exposure to non-US assets can mitigate some of this risk. By spreading investments across various geographies and asset classes, investors can reduce their vulnerability to shocks stemming from events specific to the US or any single nation. This supports the importance of international portfolio diversification in reducing overall portfolio risk.

Valuation Discrepancies: US vs. International Markets

A key aspect of Mowat's thesis is the valuation gap between US and international equities. He suggests that many US equities are overvalued relative to their international counterparts, particularly in sectors impacted by rising interest rates. Conversely, he points to undervalued opportunities in international markets, especially in regions experiencing economic growth and positive structural changes. This speaks to the importance of value investing strategies in identifying undervalued assets worldwide.

Sector-Specific Opportunities Beyond the US

Mowat doesn't just advocate for a general shift towards international markets; he highlights specific sectors with significant growth potential outside the US. He points to opportunities in emerging market technology companies, infrastructure projects in developing economies, and renewable energy investments in regions actively pursuing green initiatives. This underscores the importance of conducting thorough due diligence on individual companies and sectors before investing.

Key Takeaways from Mowat's Analysis:

• Currency Fluctuations: The weakening US dollar presents a significant tailwind for non-US assets.
• Inflation Hedging: International markets, especially emerging markets, offer potential inflation hedges.
• Geopolitical Diversification: Non-US assets provide diversification benefits in an uncertain geopolitical climate.
• Valuation Discrepancies: International markets may offer better value relative to the potentially overvalued US market.
• Sector-Specific Opportunities: International markets present attractive opportunities across various sectors.

Implementing Mowat's Strategy: Practical Considerations

While Mowat's argument holds compelling merit, investors need a strategic approach to capitalize on these opportunities. This includes careful consideration of:

• Risk Tolerance: International investments carry varying levels of risk. Investors should assess their risk tolerance before making any significant portfolio adjustments.
• Investment Vehicles: Several vehicles can facilitate international exposure, including ETFs, mutual funds, and individual stock purchases. Thorough research into suitable investment vehicles is crucial.
• Currency Hedging: Investors may consider currency hedging strategies to mitigate the impact of currency fluctuations.
• Market Timing: It’s important to note that market timing is notoriously difficult, and even experienced investors can make mistakes. Long-term investing is crucial for mitigating risks associated with market volatility.

Conclusion

Adrian Mowat's insights provide a compelling case for a reassessment of portfolio allocations. While the US equity market will undoubtedly remain a significant component of many portfolios, the factors discussed above strongly suggest that a well-diversified portfolio with significant exposure to non-US assets is becoming increasingly crucial for investors seeking both diversification and potentially higher returns in the current economic climate. This requires a deep understanding of global macroeconomic trends, careful risk management, and a well-defined investment strategy. By incorporating these strategies and analyzing the points raised by Mowat, investors can better position themselves for success in a rapidly evolving global financial landscape.