Benefits of International Equity Investing
For years, the sheer dominance of the U.S. stock market led many investors to question the necessity of holding assets outside of North America. With the S&P 500 outperforming Canadian and international equities in four of the past five years leading up to 2024, a heavy "home bias" felt justified.
However, global market dynamics have shifted rapidly. By the end of 2024, the valuation gap between U.S. and international equity markets reached historic extremes. As growth expectations recalibrate, expanding your horizon through international equity investing is no longer just an option for diversification—it is a critical tool for capturing untapped growth and managing portfolio risk.
What are the Benefits of International Equity Investing?
When evaluating international stocks, expanding a portfolio globally provides three primary advantages:
Enhanced Diversification: Accesses world-class companies and specialized market sectors (such as European luxury or advanced Asian manufacturing) that are entirely unrepresented in North American indices.
Reduced Portfolio Volatility: Mitigates risk by capitalizing on regional differences in economic cycles, valuations, and earnings momentum.
Cyclical Outperformance: Historically, global markets operate in distinct cycles; holding international equities allows investors to capture multi-year waves of growth when domestic markets flatten.
Expanding the Map: Why 97% of Opportunities Lie Abroad
To put global wealth into perspective, Canada represents a mere 2.8% of the global equity market capitalization. This means an astonishing 97.2% of the world's investment opportunities exist outside of our borders.
For decades, Canadian regulatory frameworks restricted access to these markets; it wasn’t until 2000 that the government began raising foreign RRSP limits, completely removing all international investment restrictions by 2005.
Today, the global equity market landscape is distributed across four distinct geographic segments:
United States: 62.6%
Developed Markets (e.g., Europe, Japan): 25.5%
Emerging Markets (e.g., China, India): 9.1%
Canada: 2.8%
While the U.S. remains the natural secondary destination for Canadian capital, focusing strictly on North America leaves a massive 34.6% of the investable global economy completely untapped.
The Consumer Paradox: Thinking Globally, Investing Locally
Consider your everyday consumer purchasing decisions.
What brand of vehicle do you drive? It may be a BMW (German), a Toyota (Japanese), or a Hyundai (Korean). Even if you drive an American legacy brand like a Jeep or a RAM truck, its parent company is rooted in Italy.
Think about the personal items you buy: a Swiss luxury watch from Tag Heuer, or a premium leather handbag from French and Italian design houses like Louis Vuitton or Gucci.
When we shop as consumers, we actively seek out the best worldwide brands to find the highest quality products; we do not limit our choices to Canadian or American manufacturers.
International investing applies this exact same logic to your wealth. It expands your choices, allowing you to select premier, market-dominant corporations regardless of where their corporate headquarters reside. For instance, while North America boasts phenomenal technology and financial sectors, the vast majority of global luxury giants and automotive innovators are located across Europe and Asia.
The Core Advantages of International Equities
1. Capitalizing on Performance Cycles
No single geographic market leads the world indefinitely. Equity markets move through multi-year cycles of relative outperformance. By holding a globally diversified portfolio, you ensure your wealth is positioned to capture the leading edge of whichever region is driving global growth.
This historical breakdown illustrates the rolling 10-year annualized growth cycles across major regions:
10-Year Equity Index Returns (CAGR in CAD)
| Equity Index (Returns in CAD) | 2014–2024 | 1997–2007 | 1984–1994 |
|---|---|---|---|
| S&P 500 Index (United States) | 13.5% Leader | 0.5% | 11.1% |
| S&P/TSX Index (Canada) | 5.4% | 7.5% Leader | 5.8% |
| MSCI EAFE Index (International Developed) | 4.7% | 2.8% | 16.4% Leader |
*Index returns represent annualized performance in Canadian Dollars, excluding dividends.
While the U.S. market dominated the decade leading up to 2024, the Canadian TSX led the decade prior, and international developed markets dramatically outperformed both during the late 80s and early 90s. Global exposure effectively smooths out these generational transitions, lowering long-term portfolio volatility.
2. Exploiting Deep Valuation Differentials
Another key pillar of international equity investing is the ability to exploit regional differences in valuations, dividend yields, and earnings expectations.
When domestic or U.S. markets trade at highly elevated historical premiums, international markets frequently offer a steep valuation discount alongside higher starting dividend yields.
Regional Index Fundamentals & Valuations
| Regional Equity Index | Price / Earnings Ratio | Forecast EPS Growth | Dividend Yield | ||
|---|---|---|---|---|---|
| 2025 | 2026 | 2025 | 2026 | ||
| S&P 500 Index (USA) | 22.7 | 20.1 | 9.8% | 12.7% | 1.4% |
| S&P TSX Index (Canada) | 15.9 | 14.7 | 14.6% | 7.8% | 2.9% |
| MSCI EAFE Index (International) | 15.8 | 14.4 | 2.9% | 9.9% | 3.1% |
| MSCI Emerging Markets | 12.9 | 11.5 | 13.2% | 12.5% | 2.9% |
*Source: Bloomberg market data projections mid-2025.
Aligning Your Portfolio for Global Resilience
Maintaining a globally diversified portfolio across all regions isn’t about abandoning North American growth; it is about building an investment structure capable of navigating changing tides. By actively incorporating international equities, you gain access to superior global corporations, lower your structural portfolio volatility, and unlock critical avenues for long-term compounding.
To evaluate your current global exposure or to explore how the JCIC International Equity portfolio can help optimize your asset allocation, contact your JCIC Relationship Manager today.
Disclosure: Although we obtain information contained in our newsletter from sources we believe to be reliable, we cannot guarantee its accuracy. The opinions expressed in the newsletter are those of JCIC Asset Management, its editors and contributors, and may change without notice. Any views or opinions expressed in the newsletter may not reflect those of the firm as a whole. The information in our newsletter may become outdated and we have no obligation to update it.
The information in our newsletter is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. It is provided for information purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor or a group of investors. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable.
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