The Impact of International Markets
October 25, 2016
Founder and CEO, Scottsdale Wealth Planning, Inc.
Just over 90 days ago, “Brexit” dominated headlines. The Washington Post said the vote had “escalated the risk of global recession, plunged financial markets into free fall,”1 becoming the latest international crises to induce market volatility. Six months earlier, it was turmoil in Chinese equity markets. One year before that, Greece’s debt issues. Pushed from headline to headline, it can be difficult to understand the value of international markets, and why and what you should be following.
Within the world of “investable” companies (that is, those available to American investors,) only one half of the market value exists inside the United States. International and emerging markets provides investors access to the other half, and along with it, one-half of the world’s opportunities and potential return. In addition, international markets can provide a diverse set of investment options and reduce volatility – giving investors a bigger set of securities across asset classes. Since different countries deliver different returns at different times (under different currencies), a global investment strategy can offer a long investment horizon by capturing those returns – and the highs and lows.
Similar effects of opportunity applies to investments made by international markets into the United States. Just as we invest in international markets, the global community invests in us.
There is investment safety and security in U.S. markets compared to many international countries. In the past year alone, several central banks around the world made headlines by adopting negative-interest rates and by purchasing our (historically low-yielding) U.S. Treasurys at record levels of demand, described by the Wall Street Journal as a “frenzy of buying.” 2
Investments in Arizona and our real estate market is becoming more of an attraction to the foreign investor – a low-price choice compared to our West Coast neighbors. The growth of our population, new companies and higher education (and the skilled work force it produces) also adds to the investment decision-making equation. For this reason, the effects of relative foreign currency values cannot be ignored. To illustrate, when the Canadian dollar is weak, more-than one million recorded tourists who visit Arizona annually3 literally have less American dollars to spend in our shops and restaurants – and on vacation homes. Thus, having an impact on our local economy.4
Understanding the opportunities provided by international markets, and the value they bring not only to investment opportunities, but to Arizona, can help us stay focused when the media reports its next “crisis” and also when managing our business.
Paul Ohanian, is founder and CEO of Scottsdale Wealth Planning, Inc., an Old Town-based registered investment advisor, and Certified Financial Planner® with more than 25 years of experience providing financial services to the Valley. Visit him at www.scottsdalewealthplanning.com.
1 “Brexit Raises Risk of Global Recession as Financial Markets Plunge,” Washington Post, June 24, 2016.
2 “Foreign Demand Soars for US Treasurys, the ‘One-Eyed King’”, Wall Street Journal, June 9, 2016.
3 One Million and Growing: Arizona’s Canadian Tourists, Arizona Lodging & Tourism Association, February 8,2016.
4 “Come Back, Canucks: Florida laments lack of Canadian tourists this winter”, The Guardian, December 8, 2015.
Information contained in this article is for informational purposes only and should not be considered investment advice. Advice may only be provided after entering into an advisory agreement with Scottsdale Wealth Planning. Information is at a period in time and subject to change. Scottsdale Wealth Planning’s current Disclosure Brochure is set forth on Form ADV Part 2 and is available for your review upon request.
Real Estate & Business Forecast Seminar
FRIDAY, NOVEMBER 18, 2016 – 9:00 AM TO 12:30 PM
Hear from Wayne Stutzer and Elliott Pollack on job growth, economic cycles, tax law changes, the global impact on US economy and much more.
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Credit: 3 hrs.Legal Issues