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Weekly Market Trends

International Leads the Way

International stocks are outperforming on a relative basis despite US markets being on the upswing for four of the five weeks so far this year — and international valuations are still constructive. 

3 min read
Head of SPDR Americas Research

This article was written with contributions from Ronnie Kuriakose. Ronnie is a Research Analyst on the SPDR Americas Research Team. 

International stocks are outperforming relative to US stocks by 13% on a trailing three-month basis, ranking in the 99th percentile over the past 20 years.1 This is largely due to a weakening US dollar and fewer downside earnings revisions.

table of market performance for the week ending 3 February 2023

Mixed Results in the US

The Fed raised rates by 25 basis points (bps) last week. While a slowdown from its previous 50 bp hikes, the Fed indicated that the fight to tame inflation is far from over — especially as the January jobs report came in much stronger than expected. Despite the hike, the Consumer Sentiment Index is estimating an increase for February, for the third month in a row. Meanwhile, the lackluster earnings season continued as Big Tech firms released tepid results — and expectations for this week’s releases are about the same.

IMF: Adverse Risks Have Moderated

The International Monetary Fund (IMF) raised its world gross domestic product (GDP) forecast for 2023 from 2.7% to 2.9%.2 While still below the historical average of 3.8%, adverse risks have moderated since its previous estimate in October.

EU Unveils Plans for Clean Tech Push

The European Union has revealed its Green Deal Industrial Plan. Widely seen as a response to the US’s Inflation Reduction Act, it aims to put Europe at the forefront of the clean tech industry through simplified regulations and bolstered investments in renewable energy technology. 

European Countries Lead Momentum

Germany, France, and the UK are leading on price, technical, and continuous momentum levels.3 Despite the strong performance, valuations remain attractive for developed ex-US markets, with the relative forward price-to-earnings (P/E) ratio for the MSCI World ex-US Index trading at a 28% discount to the S&P 500® — close to a 20-year low — potentially offering an attractive entry point.4

Implementation Idea: SPDR® Portfolio Developed World ex-US ETF (SPDW) 

Investors looking to benefit from the recent performance in developed ex-US countries may want to consider the SPDR® Portfolio Developed World ex-US ETF (SPDW) which, at 4 bps, is among the lowest-cost US-domiciled developed world ETFs.5

On a month-to-date basis, the non-US equity category saw $21 billion of inflows, its ninth-best month ever, while international region funds had their best month ever with a record $5 billion in inflows.6 Looking ahead, changes to 2023 earnings-per-share (EPS) estimates and the up-to-downgrade ratio also are being led by the European region and Japan, as seen below.7

2023 EPS Revision 3-month Up-to-downgrade Ratio

A dual-axis chart showing the change to 2023 EPS estimates as bars, and the up-to-downgrade ratio as dot plots, showing indices split by major regions

SPDW Standard Performance as of December 31, 2022

Table showing standard performance for SPDW as of 31 December 2022

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