The Case for Country Allocation

Now more than ever, it may be important to strategically invest in international markets.

Dina Ting, CFA

Dina Ting, CFA Head of Global Index Portfolio, Management Team, Franklin LibertyShares ETFs


2019 was a “Goldilocks” year with low interest rates, stable earnings growth, and low inflation. Positive performance across many asset classes included 32% from US equity (based on the S&P 500), 22% from international equity (FTSE All World ex-US1), 9% from US aggregate bonds, and 18% from gold.2 Bull markets feed on low inflation and globally, politicians appear likely to continue expansive economic policies. We are in unchartered territory, with the longest post-recession period and highest stock market level in history, and the market consensus view is to not expect a strong recovery in profits in 2020 or 2021. In our view, we’ll stay on the path of a longer earnings growth rate, just not as fast as past growth.

Around the world, positive returns masked volatility throughout 2019, driven by trade tensions, natural disasters, multiple populist moves causing unrest in previously stable countries (e.g. Hong Kong, France, and Chile), and political and military showdowns (e.g., North Korea, Saudi Arabia, Israel, Syria, and parts of Africa). When an exogenous event occurs (i.e., a war or disease), we have fewer policy tools than we did in the past because interest rates have been lowered, reserve banks around the world have already expanded their balance sheets, less soft policies exist, and there is less of the ability to work together within and between countries.

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  1. Financial Times Stock Exchange (FTSE) All World Ex-United States Index, calendar year 2019. Indexes are unmanaged, and one cannot invest directly in an index. Past performance is not an indicator or guarantee of future performance. Important data provider notices and terms available at

  2. Bloomberg. As of December 2019. Important data provider notices and terms available at


All investments involve risks, including possible loss of principal. Stock prices fluctuate, sometimes rapidly and dramatically, due to factors affecting individual companies, particular industries or sectors, or general market conditions. Special risks are associated with foreign investing, including currency fluctuations, economic instability and political developments. Investments in developing markets, of which frontier markets are a subset, involve heightened risks related to the same factors, in addition to those associated with these markets’ smaller size, lesser liquidity and lack of established legal, political, business and social frameworks to support securities markets. Because these frameworks are typically even less developed in frontier markets, as well as various factors including the increased potential for extreme price volatility, illiquidity, trade barriers and exchange controls, the risks associated with developing markets are magnified in frontier markets.