Watch: Why We’re Overweighting Non-U.S. Equities
January 23, 2018
Calamos global portfolios are overweighting non-U.S. equities on the expectation of non-U.S. markets’ outperformance over the next few years. In the latest addition to our new Ask the Portfolio Manager video series, Nick Niziolek, CFA, and Co-CIO, Head of International and Global Strategies and Senior Co-Portfolio Manager, provides the International/Global team perspective.
The Dollar, Synchronized Global Growth, Valuations
Niziolek identifies three tailwinds with the potential to drive non-U.S. markets, including:
- The weaker U.S. dollar—Calamos believes the dollar has become overvalued by more than 20% versus most major currencies but now expects it to weaken as overseas markets strengthen. “Historically in a weak dollar environment, much better returns have been had from overseas assets,” says Niziolek.
- The pick-up in global synchronized growth
- Relative valuations, with European, Japanese and emerging markets trading at significant discounts to the U.S. market and still cheap versus historical measures.
Optimism about Emerging Markets
Emerging markets, in particular, look attractive as the team believes EM could be at the “beginning of a multi-year cycle of outperformance.” Niziolek expands on the four factors—region fundamentals, relative valuations, liquidity conditions and relative strength—used to identify where to best allocate capital.
China and India are the team’s two favorite markets. Niziolek says he still sees significant bottom-up value in China, and notes that it nonetheless is a consensus underweight. The opposite is true of India, which Niziolek describes as a more fully valued market and a consensus overweight. Even so, he says, India is “one of the most compelling opportunities” whose valuations are more than justified.
Fintech as a Global Theme
Disruptive technologies in financial services--or fintech--is one of the secular themes the team pays close attention to, especially in emerging markets where they can be adopted more quickly than in developed markets. Niziolek provides a few examples.
The Role Played by Automation and Robotics
Yet another focus for the team is emerging market demand for automation and robotics, which has the potential for continued strong secular growth for the portfolios. Niziolek discusses how automation supports EM companies’ ability to be productive and efficient, helping drive investment results.
Calamos Evolving World Growth Fund (CNWIX) Backstory
A broader opportunity set and a better way to gain exposure to emerging markets over a full market cycle—that’s what the team intended to create almost 10 years ago when Calamos launched its emerging market fund, Calamos Evolving World Growth Fund (CNWIX).
Niziolek explains how the fund differs from other emerging markets funds, including its use of convertible bonds and developed market companies that have significant exposure to emerging markets.
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Opinions, estimates, forecasts, and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. The views and strategies described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.
An investment in the Fund(s) is subject to risks, and you could lose money on your investment in the Fund(s). There can be no assurance that the Fund(s) will achieve its investment objective. Your investment in the Fund(s) is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund(s) can increase during times of significant market volatility. The Fund(s) also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund's prospectus.
Foreign Securities Risk — Risks associated with investing in foreign securities include fluctuations in the exchange rates of foreign currencies that may affect the U.S. dollar value of a security, the possibility of substantial price volatility as a result of political and economic instability in the foreign country, less public information about issuers of securities, different securities regulation, different accounting, auditing and financial reporting standards and less liquidity than in U.S. markets. Emerging Markets Risk — Emerging market countries may have relatively unstable governments and economies based on only a few industries, which may cause greater instability. The value of emerging market securities will likely be particularly sensitive to changes in the economies of such countries. These countries are also more likely to experience higher levels of inflation, deflation or currency devaluations, which could hurt their economies and securities markets.
Important Risk Information. An investment in the Fund is subject to risks, and you could lose money on your investment in the Fund. There can be no assurance that the Fund will achieve its investment objective. Your investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. The risks associated with an investment in the Fund can increase during times of significant market volatility. The Fund also has specific principal risks, which are described below. More detailed information regarding these risks can be found in the Fund’s prospectus.
The principal risks of investing in the Calamos Evolving World Growth Fund include: equity securities risk consisting of market prices declining in general, growth stock risk consisting of potential increased volatility due to securities trading at higher multiples, foreign securities risk, emerging markets risk, convertible securities risk and portfolio selection risk. As a result of political or economic instability in foreign countries, there can be special risks associated with investing in foreign securities, including fluctuations in currency exchange rates, increased price volatility and difficulty obtaining information. In addition, emerging markets may present additional risk due to potential for greater economic and political instability in less developed countries.