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Controlled-risk foreign investment strategy can boost yields
1Simms Capital Management, Inc. (SCM), Greenwich, Connecticut, USA. simmscapitalinfo@simmscapital.com
Summary
Despite recent high returns in U.S. markets, international investing offers compelling opportunities. Global markets, including Europe, Australia, and the Far East, outperformed the S&P 500 in 1999, suggesting a need to diversify investment portfolios.
Area of Science:
- Finance
- Economics
- Investment Management
Background:
- Healthcare organizations have recently achieved significant returns from U.S. stock market investments.
- Many investment managers perceive U.S. markets as consistently profitable and view international markets as excessively risky due to economic uncertainties.
Purpose of the Study:
- To evaluate the potential benefits of international investing for healthcare organizations.
- To challenge the prevailing notion that U.S. markets are the sole avenue for high returns and to highlight the risks associated with over-concentration in domestic markets.
Main Methods:
- Comparative market performance analysis, contrasting U.S. stock market returns (S&P 500) with international markets (Europe, Australia, Far East).
- Examination of market indicators, such as price/earnings ratios, to assess future profitability trends in the U.S. market.
Main Results:
- In 1999, European, Australian, and Far Eastern markets surpassed the S&P 500's performance, marking the first instance in five years.
- Indicators like rising price/earnings ratios suggest a potential decrease in future U.S. stock market profitability.
Conclusions:
- Investment managers should reconsider and explore international investment opportunities.
- Diversification into overseas markets is advisable given the shifting global market dynamics and potential U.S. market slowdown.