Home advantage? Why investors may want to avoid the international trade

Investors may want to reduce their international exposure now and stick to their home jurisdiction.

According to Main Management CEO Kim Arthur, global markets will experience significant difficulties due to the weakening greenback.

“One of the strongest predictors for (the) future performance of international stocks versus US stocks is what the US dollar does,” Arthur told CNBC.Edge ETFs” this week. “From 2011 to 2022, the dollar was in a straight bull market, so you were going to lose on international stocks no matter what you did.”

Friday, the US dollar index hit a 15-month low. It comes about 10 months after hitting a 10-year high.

“The dollar peaked last September, okay? So you really have to have an opinion on where the dollar is headed. We personally believe the dollar is going down,” Arthur said.

Arthur, who headed Bank of America’s institutional sales and trading department, believes the dollar will eventually return to a period of strengthening.

“We are way ahead of the rest of the world in terms of fighting inflation. Our inflation numbers are lower than the rest of the world. Our interest rates are higher than the rest of the world,” he said. said Arthur. “So what does that mean? It’s a perfect setup where we’re going to cut rates before the rest of the world. And that gap leads to a stronger dollar.”

ETF Action founding partner Mike Akins cites another market dynamic that could hurt global equities: the strong appetite for mega-cap U.S. tech stocks.

“You see more and more flows continuing to go into US equities. … Very little money is going into the international market. And that kind of thing is creating itself,” Akins said. “I don’t know what the catalyst is there, other than to say it has to start with these big names: Microsoft, Apple, Amazon, You’re hereNOW Google (Alphabet). These names that create this multiple expansion for the broader S&P 500 because they make up such a large percentage of it. That’s where the catalysts will have to be to see the value come back, to see the international come back (and) to see the emerging come back.”

At Friday’s close, the iShares MSCI Emerging Markets ETFs is up 8% this year. During this time, the S&P500 is up 17%.