Global Investing overview intro copy

Investing globally can help investors work toward global diversification, tap into new opportunities for growth and harness the potential increased importance of emerging markets. But many investors may be missing out on these opportunities.

In some ways, it’s understandable. U.S. equities have outperformed global equities in three consecutive years — 2018, ‘19 and ‘20 — which has resulted in global investing losing its shine for many U.S. investors.

We provide a broader perspective, looking beyond North America to focus on growth in the economies of Asia and elsewhere. We shine a light on what have been the principal drivers of equity returns and the growing trends behind thematic investing, as well as the potential of emerging markets. You’ll find insights provided in research papers, blogs and a Chart of the Week that succinctly puts topical issues in context.


Global Diversification section starter

 


Global Diversification section

Global Diversification

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Chart 1: North America

Looking Beyond North America

The weight of North American companies in global equity markets is at an all-time high, representing over 60% of market capitalization in the MSCI ACWI Index.

Chart 2 - Tapping into Global and Regional Revenues

Tapping into Global and Regional Revenues

Although companies outside North America accounted for less than 40% of global equity market capitalization they captured almost 70% of the global revenues within the MSCI ACWI Index.

Blog - How Diversified Are US Equity Investors

Blog: How Diversified Are US Equity Investors

US investors might assume there are ample opportunities for portfolio diversification and potential risk reduction in the domestic market. Is this assumption correct?

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Blog: Accounting for Revenue Sources Tells a Richer Story

Blog: Accounting for Revenue Sources Tells a Richer Story

Blog: Accounting for Revenue Sources Tells a Richer Story

Despite North America’s outsized weighting in the MSCI ACWI Index, companies in the index generated only 30% of their global revenues there.

Chart 8 - Global Country Correlation Matrix by Sub-Regions

Global Country Correlation Matrix by Sub-Regions

Splitting global equity markets across two dimensions — level of development and geographical position — resulted in natural local-return correlation clusters.

Chart 9 - Correlations Within and Across Global Markets

Correlations Within and Across Global Markets

Correlations Within and Across Global Markets

MSCI Research looked at average pairwise correlation between countries’ USD returns within developed and emerging markets (EM) for the last 20 years.

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Chart 15- Going Digital: Tech-Led Growth Has Affected Country Concentration

Going Digital: Tech-Led Growth Has Affected Country Concentration

Going Digital: Tech-Led Growth Has Affected Country Concentration

The strong performance of tech companies has also led to increased concentration in the MSCI USA Index and MSCI China Index.

Chart 14 - Where Next in Terms of Global Growth

Concentration Through a Country Lens: Impact on Regional Diversification

Concentration Through a Country Lens: Impact on Regional Diversification

Just as country indexes can become concentrated in a handful of stocks, the same can happen with countries.

Chart 13-Increased Stock Market Concentration: Risk or Opportunity?

Increased Stock Market Concentration: Risk or Opportunity?

Increased Stock Market Concentration: Risk or Opportunity?

With a stellar growth of a handful of large-cap companies, an index can become more concentrated, with more of the performance and risk driven by an increasingly smaller number of stocks.

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Chart 12-Dispersion in Equity Markets

Dispersion in Equity Markets

Dispersion in Equity Markets

When stock returns are more spread out, that creates more opportunities for active managers. When dispersion of returns is tighter, there are fewer opportunities.

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Growth and Opportunities section starter

 


Growth and Opportunities section

Growth and Opportunities

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Chart 3 - Earnings-Growth Estimates Rose Across the Globe

Earnings-Growth Estimates Rose Across the Globe

MSCI Research has shown that dividends and earnings growth were principal drivers of equity returns, particularly in the long run.

Chart 4 - Global Research and Development Spending as Percentage of GDP

Global Research and Development Spending as Percentage of GDP

Corporate and government spending on research and development (R&D) accounted for about 2% of GDP globally, as of December 2018, with wide variation by country.

Chart 5 - Thematic Investing is a Global Phenomenon

Thematic Investing is a Global Phenomenon

Thematic investing aims to help investors benefit from long-term structural, transformative trends.

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Chart 6 - Emerging-Market Companies

Many Emerging-Market Companies Aligned with UN SDGs

More companies in emerging markets were in line with many of the UN Sustainable Development Goals (SDGs) than firms in North America.

Chart 7 - Emerging-Market Companies Duplicate 3

Low-Carbon Revenues and Readiness

Three-quarters of the USD 1.5 trillion in revenue from clean tech for MSCI ACWI constituents came from outside North America.

Chart 16- Where Next in Terms of Global Growth

Where Next in Terms of Global Growth

Where Next in Terms of Global Growth

While all countries’ GDP were buffeted in 2020 by the COVID-19 pandemic, the emerging economies were less affected than advanced ones.

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Chart 17-Does positive GDP growth lead to strong stock returns?

Does positive GDP growth lead to strong stock returns?

Does positive GDP growth lead to strong stock returns?

Traditionally, GDP growth has been thought as a lead indicator for the performance of domestic stock markets. But has this changed?

Chart 19 Understanding Emerging-and Developed-Market Equity Performance

Understanding Emerging- and Developed-Market Equity Performance

Understanding Emerging- and Developed-Market Equity Performance

When investors are considering to invest in the equity market, they should understand what is the risk premia that it offers.

Not All Listed Stocks Are Investable: The Concept of Free-Float Market Capitalization

Not All Listed Stocks Are Investable: The Concept of Free-Float Market Capitalization

Not All Listed Stocks Are Investable: The Concept of Free-Float Market Capitalization

When assessing a potential investment within a given market, investors may want to consider the difference between total and free-float market capitalization.

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Importance of Emerging Markets section starter

 


Importance of Emerging Markets section

Importance of Emerging Markets

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Insights Gallery - The Rise of Emerging Markets & Asia

The Rise of Emerging Markets & Asia

Performance leadership has rotated significantly within emerging markets. Fundamental data, could help identify drivers of performance trends among countries and subregions.

Evolution of Emerging Markets

Evolution of Emerging Markets

Over the past 20 years, emerging markets have increased significantly as a share of the MSCI ACWI Index.

Blog - China A Shares: What Have We Learned?

Blog: China A Shares: What Have We Learned?

We explore the China A shares inclusion into the MSCI Emerging Market Index by looking back at how it occurred and what’s happened

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Blog: Kuwait’s Move from Frontier to Emerging Market

Blog: Kuwait’s Move from Frontier to Emerging Market

Blog: Kuwait’s Move from Frontier to Emerging Market

Kuwait’s reclassification from frontier to emerging market and inclusion in the MSCI Emerging Markets Index provides investors exposure to yet another Gulf Cooperation Council member.

Chart 10 - The Evolution of the Emerging Markets Universe

The Evolution of the Emerging Markets Universe

The Evolution of the Emerging Markets Universe

Looking at the evolution of the MSCI Emerging Markets Index and its weight in the ACWI, is a testament to the important role EM plays in global asset allocation.

Chart 11- ACWI Economic Exposure Distribution Across Regions

ACWI Economic Exposure Distribution Across Regions

ACWI Economic Exposure Distribution Across Regions

Just 15 years ago, corporate revenues from emerging markets (EM) represented around 10% of global revenues.

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