Phil Wool, a savvy investor from Raliant Capital, argues for looking beyond U.S. stocks, which are historically overvalued. He highlights the potential of emerging markets, suggesting they offer better growth at attractive valuations. Wool challenges common misconceptions about international equities, emphasizing their technology sectors' crucial role in the AI boom. He introduces a 'quantamental' approach to investing, merging data analysis with strong fundamentals to uncover hidden gems in international markets.
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insights INSIGHT
U.S. Stocks Are Historically Expensive
The Shiller CAPE for the S&P 500 sits near 38, well above historical norms.
Phil Wool warns this implies likely below‑average U.S. returns over the next decade.
volunteer_activism ADVICE
Hunt For Unreasonably Cheap International Stocks
Look inside discounted international markets for companies with strong fundamentals and governance.
Phil Wool recommends active stock selection to exploit persistent, unreasonable discounts.
insights INSIGHT
Systematic "Quantamental" Stock Picking Works
Raliant blends systematic models and machine learning to screen thousands of stocks globally.
Phil Wool says the signals largely mirror what a good local fundamental analyst would seek.
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Stepping beyond America's borders might be the smartest move for savvy investors right now. Phil Wool of Raliant Capital makes a compelling case for international equities—particularly emerging markets—at a time when U.S. stocks trade at historically high valuations.
The numbers tell a striking story: U.S. equities currently command a Shiller-CAPE ratio of 38 times earnings—three standard deviations above historical averages. While this doesn't predict an imminent crash, it strongly suggests lower-than-average returns over the next decade. Meanwhile, international markets offer better growth prospects at more attractive valuations.
Wool challenges the oversimplified narrative that international stocks have performed well this year solely because of dollar weakness. He highlights how emerging markets contain significant technology exposure, with many companies either competing with or supplying critical components to U.S. tech giants driving the AI revolution. This mirrors patterns from the dot-com era, when companies supplying internet infrastructure in emerging markets ultimately outperformed many headline-grabbing U.S. names.
For investors concerned about selecting winners in unfamiliar markets, Raliant's "quantamental" approach offers a solution. Their systematic strategies analyze billions of data points to identify companies with strong fundamentals flying under the radar. They incorporate market-specific factors that pure fundamental investors might miss, like foreign institutional investor holdings in South Korea or retail investor behavior in Taiwan.
Recent trade policy developments, including the Japan-U.S. trade agreement, demonstrate how market overreactions to political theater create opportunities for patient investors focused on fundamentals. These dislocations generate alpha for systematic strategies that can identify when stocks have unreasonably discounted good news or failed to properly price in positive developments.
Ready to diversify globally? Consider using the ACWI as your benchmark, with approximately 60% in U.S. stocks and 15% in emerging markets—then adjust based on current valuations and opportunities. With today's pronounced valuation disparities, overweighting international exposure might be the prudent choice for investors seeking both diversification and potential outperformance in the coming years.
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