For a long time the US has been the best place to invest. But experts who believe that this will change in 2023 are sure to come up with many reasons why international stocks could outperform.
David Kostin (chief US stock strategist at Goldman Sachs), outlined some of the reasons in a recent note to his clients. While he believes the US economy’s trajectory is not clear at the moment, things are improving in China and Europe. Europe might even avoid a recession altogether.
He wrote that “the growth outlooks for China and Europe have improved significantly” due to China’s end of zero-COVID policies, and the fall in gas prices in Europe. “Our economists have updated their GDP forecasts for both regions and do not expect a Euro-area recession this winter,” he wrote.
Kostin stated that Goldman Sachs’ stock list with large exposure to China had outperformed the S&P 500 by five percentage points as of January 20th. This was due to a weaker US dollar, which helped US-based companies to make more profit from overseas sales.
Kostin stated that Goldman’s Asian equity strategists believe profits will grow 13% in this year and they forecast a 9% increase for the MSCI China index.
“They see potential upside as the index catch up to the cyclical stocks which have driven this move. He said that the markets team sees more upside in China-sensitive assets.
He said that stocks with high international exposure, not just China exposure, outperformed their US-centric counterparts for the same reasons. Europe, for example, has benefited from China’s reopening its economy and a milder winter than was expected.
He believes stocks that have a high percentage of international sales will be well-positioned for a strong 2023.
These 17 companies all receive at least 80% of revenue from outside the US. This means that they will be big beneficiaries of the trends Kostin highlighted. This is a significant difference from the average S&P 500 company which gets only 29% of its revenue outside the US.
Below are the stocks ranked according to how much revenue they receive from overseas markets.
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