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Fund Spy

The Bull Market Has Warped Your Global Stock Portfolio

The long bull market has made you wealthy, but it may have distorted your global stock allocation and increased your price risk.

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Unless you rebalance regularly, you now own more U.S. stocks, and they're more expensive. That's because U.S. stocks have gained almost 6 times as much as non-U.S. equities since the March 2009 bottom of the global financial crisis through Oct. 31, 2019, claiming more benchmark real estate and commanding higher valuations. The MSCI ACWI Index's helping of U.S. stocks has swelled to 55% from 41%. The gap between domestic and overseas valuations, though it has been wider at points in the past 10 years, still yawns. The S&P 500's trailing 12-month and forward price/earnings ratios are about one third higher than those of MSCI ACWI ex USA Index; its price/book values are more than twice the latter benchmark's.

Not all active global stock funds have chased the U.S. market. Most acknowledge that overseas companies offer more attractive valuations on average than their U.S. counterparts, and some have taken gains in the latter to redeploy in the former. The median active world stock fund's U.S. stake, however, still has increased to more than 50% from 42% in the past 10 years. Some world stock-pickers, however, have been more assiduous trimmers of U.S. stocks and buyers of non-U.S. shares. Here are some of the best ones.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.