Why value investing has worked better outside the US
I was intrigued by this observation. So, I looked at Morningstar's indexes. Sure enough, value investing has prospered beyond American shores—this year, as well as over the past three-, five-, and 10-year periods.
'Magnificent Seven' vs. 'Granolas'
US stocks of all styles have beaten international stocks for years, due to a strengthening dollar, superior returns on invested capital, and expanding price multiples.
Morningstar's US growth index is dominated by the ' Magnificent Seven.' But internationally, the scale is far smaller. There is not a single public company outside the US currently worth $1 trillion.
There was a time when the ' Granolas ' stocks were being promoted as Europe's answer to the Magnificent Seven (names like GSK, Roche, Nestle, L'Oreal and AstraZeneca). But don't blame yourself if you haven't heard of the Granolas. They never really rivaled the Magnificent Seven from a performance perspective.
So, what has boosted value investing internationally? Largely, the financial-services sector (which was lifted by higher interest rates) and energy stocks.
Looking beyond Europe with style
While value has outperformed growth in Europe over the past five years, Europe now represents less than half of equity market capitalization outside the US.
Rather, value stocks in emerging markets (like China, India, and Brazil) and developed Asia have outperformed by an even larger margin than in Europe.
The decline of Chinese internet companies, which were once big growth stocks, helps explain why value investing has triumphed over growth investing in emerging markets in recent years.
On the developed-markets side, Japan has seen rising interest rates and improved economic and investment conditions disproportionately benefit financial-services stocks, which tend to reside on the value side of the market.
Value's underperformance in the US: Is it macro or micro?
While I have mentioned some macroeconomic factors above, I am generally skeptical of attempts to explain style leadership from the top down. Back in 2022, when sticky inflation prompted the largest interest-rate hikes in a generation, US growth stocks fell much further than value. A popular narrative arose: Growth stocks are more sensitive to interest rates.
But then growth bounced back in 2023 despite high rates. The Magnificent Seven and others rode a wave of enthusiasm for AI. Growth stocks' thriving amid higher rates is hardly unprecedented. Between 2015 and 2018, the US Federal Reserve hiked rates several times, yet growth beat value by a wide margin.
Ultimately, I agree with Rasmussen that the triumph of growth over value in the US has more to do with 'historically unique and rare circumstances.'
I've been following markets long enough to know that style leadership can be cyclical. Right now, it's value investing that's being fundamentally questioned.
Value stocks have been called 'structurally challenged,' in 'secular decline,' and 'value traps.' But the value side of the market has always been home to troubled companies. Value investing is about stocks that under promise and overdeliver.
Perhaps the long-term cycle will turn again in value's favor. AI could be revolutionary, but, like the internet, ahead of itself from an investment perspective. We could look back at 2025 as a historical inflection point, as marking a new market regime.
The problem is that these things are only clear in retrospect. It will take time to know if the rotations we've seen in early 2025 will last, or if they're just head fakes.
____
This article was provided to The Associated Press by Morningstar. For more markets content, go to https://www.morningstar.com/markets.
Dan Lefkovitz is a strategist for Morningstar Indexes.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Province
30 minutes ago
- The Province
Canada's economy is showing 'resilience' against U.S. tariffs. Why?
Published Aug 04, 2025 • 5 minute read Canadian and American flags fly near the Ambassador Bridge at the Canada-USA border crossing in Windsor, Ont. on Saturday, March 21, 2020. Photo by Rob Gurdebeke / THE CANADIAN PRESS OTTAWA — 'Some resilience' — those were the two words Bank of Canada governor Tiff Macklem used last week to describe how the Canadian economy is holding up under the weight of U.S. tariffs. This advertisement has not loaded yet, but your article continues below. THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLY Subscribe now to read the latest news in your city and across Canada. Exclusive articles by top sports columnists Patrick Johnston, Ben Kuzma, J.J. Abrams and others. Plus, Canucks Report, Sports and Headline News newsletters and events. Unlimited online access to The Province and 15 news sites with one account. The Province ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles and comics, including the New York Times Crossword. Support local journalism. SUBSCRIBE TO UNLOCK MORE ARTICLES Subscribe now to read the latest news in your city and across Canada. Exclusive articles by top sports columnists Patrick Johnston, Ben Kuzma, J.J. Abrams and others. Plus, Canucks Report, Sports and Headline News newsletters and events. Unlimited online access to The Province and 15 news sites with one account. The Province ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles and comics, including the New York Times Crossword. Support local journalism. REGISTER / SIGN IN TO UNLOCK MORE ARTICLES Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account. Share your thoughts and join the conversation in the comments. Enjoy additional articles per month. Get email updates from your favourite authors. THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK. Create an account or sign in to continue with your reading experience. Access articles from across Canada with one account Share your thoughts and join the conversation in the comments Enjoy additional articles per month Get email updates from your favourite authors Just a few days later, U.S. President Donald Trump added 35 per cent tariffs on Canadian goods to a running tally that includes hefty duties on steel, aluminum, automobiles and, more recently, semi-finished copper. With tariffs piling up over the past few months, economists say Canada's economy is starting to show cracks — but few signs of collapse. TD Bank economist Marc Ercolao conceded it's a 'bit of surprise' to see the economy holding up against a massive disruption from Canada's largest trading partner. 'Many months ago, ourselves — as well as other economic forecasters — had an outlook for a much weaker Canadian economy. Obviously, that isn't manifesting now,' he said in an interview. 'We are avoiding the worst-case scenario.' This advertisement has not loaded yet, but your article continues below. On Thursday, Statistics Canada gave a glimpse at how the economy wrapped up the second quarter of the year when many of those tariffs came into full effect. While the agency sees a couple of small contractions in real gross domestic product by industry in April and May, its flash estimates show the economy rebounding somewhat in June. If those early readings pan out, StatCan said that would be good enough for flat growth overall on the quarter. Some of those results are distorted by volatility _ businesses rushing to get ahead of tariffs boosted activity in the first quarter, and that's giving way to weakness in the second quarter, for example. It's still hard to pinpoint exact impacts tied to tariffs, Ercolao said, but a broad trend is emerging. Essential reading for hockey fans who eat, sleep, Canucks, repeat. By signing up you consent to receive the above newsletter from Postmedia Network Inc. Please try again This advertisement has not loaded yet, but your article continues below. 'What we can say over the last six months or so is that economic activity is somewhat flatlining,' he said. Services sectors are holding up relatively well, but Ercolao said export-heavy industries such as manufacturing and transportation are bearing the brunt of the impact. In an attempt to shore up some of that weakness, the federal government has announced various programs to support tariff-affected workers and broader plans to accelerate defence and infrastructure spending. Macklem noted during his press conference Wednesday that business and consumer confidence are still low, but have improved according to the central bank's recent surveys. And while some trade-exposed sectors have faced job losses and the unemployment has generally trended upward to nearly seven per cent, employers elsewhere in the economy continue to expand their payrolls. This advertisement has not loaded yet, but your article continues below. 'Consumption is still growing,' Macklem said. 'It's growing modestly. It's certainly being restrained by the uncertainty caused by tariffs. But it is growing and we expect that to continue through the third and fourth quarters.' Last week the Bank of Canada kept its policy interest rate unchanged at 2.75 per cent in a third consecutive decision. If the central bank were panicked about the Canadian economy's ability to withstand U.S. tariffs, Ercolao argued it would likely have lowered that rate. The past week's GDP readings were good enough for BMO to raise its outlook for the third quarter into positive territory. Forecasters at the bank now expect Canada will avoid a technical recession this year. BMO chief economist Doug Porter said in a note to clients Friday that Ottawa's personal tax cut at the start of the month and robust demand for domestic travel amid the trade war will boost the economy this quarter, as will 'the less-dire sentiment' around economic forecasts. This advertisement has not loaded yet, but your article continues below. Some other forecasters continue to pencil a tariff-induced recession into their outlooks. In the Bank of Canada's monetary policy report released alongside the rate decision, it outlined one scenario for the economy assuming the tariff situation remains largely status quo. Canada avoids a recession in that outcome. Growth in 2025 and 2026 remains overall positive, but half a percentage point lower than it would've been without the weight of tariffs. Macklem told reporters that the Bank of Canada would expect the economy to keep growing even with today's tariffs in place, 'but it'll be on a permanently lower path.' 'Unfortunately, the sad reality is that tariffs mean the economy is going to work less efficiently,' he said. This advertisement has not loaded yet, but your article continues below. Porter said in his note that the actual impact of Trump's new 35 per cent tariff on Canada's economy could be less than headline figure suggests. Because of a carve-out for Canadian exports that are compliant with CUSMA, BMO sees the effective U.S. tariff rate at roughly seven per cent under the new duties, less than a percentage point higher than where it stood before Friday. But with CUSMA up for renegotiation in 2026, Porter said that 35 per cent tariff rate could loom as a 'cudgel' over negotiations — taking full effect if the trade agreement expires without a new deal in place. The Bank of Canada published a separate 'escalation' scenario this week that would see the United States remove Canada's CUSMA exemption as it ramps up global tariffs. This advertisement has not loaded yet, but your article continues below. Real GDP would drop an extra 1.25 per cent by 2027 in this more severe case; Porter said that this outcome would be 'serious for sure, but far from disastrous.' Ercolao said much of the tariff doom-and-gloom earlier in the year was tied to the speed at which those import duties would be imposed. But the on-again, off-again nature of U.S. trade restrictions to date has given businesses time to adapt to the new way of doing business and constant delays in implementation, he said. 'If we go back to when Trump began his presidency, had he went 100 per cent on his tariff plan right away, we probably would have seen a deep economic contraction just because it would have been so sudden,' Ercolao explained. 'Now we've been afforded that time to at least try to mitigate some of the negative impacts from what these tariffs were expected to do to the Canadian economy.' Read More Vancouver Canucks Vancouver Whitecaps Local News Vancouver Canucks Sports
Globe and Mail
an hour ago
- Globe and Mail
Should You Buy Nvidia Stock Before Aug. 27? Here's What the Evidence Suggests.
Key Points After more than two years of phenomenal gains, investors are wary about the future of AI. Nvidia's GPUs are a staple in the AI revolution, and sales continue at a brisk pace. There's a growing body of evidence that suggests Nvidia's epic run will continue, as will the stocks volatility. 10 stocks we like better than Nvidia › The dawn of artificial intelligence (AI) in late 2022 has had a profound impact on the technology landscape. The initial fervor has since died down, and investors are looking for compelling evidence that the adoption of AI has room to run. Nvidia (NASDAQ: NVDA) graphics processing units (GPUs) were widely adopted and have become the gold standard for generative AI. The company is scheduled to release the results of its fiscal 2026 second quarter after the market closes on Wednesday, Aug. 27, and Wall Street and shareholders alike will be sitting on the edge of their seats looking for clues that strong demand for AI chips continues. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Let's look at the company's most recent results, what current events suggest about the future, and determine if Nvidia stock still represents a compelling opportunity heading into the company's highly anticipated financial report. Remarkable results After generating triple-digit revenue and profit growth for two consecutive fiscal years, growth inevitably slowed, and investors got the jitters. Despite tough year-over-year comps, Nvidia's results were still enviable. For its fiscal 2026 first quarter (ended April 27), Nvidia reported record revenue of $44.1 billion, which soared 69% year over year and 12% sequentially. This resulted in adjusted earnings per share (EPS) of $0.81, up 33%, but there's an asterisk on those numbers. Nvidia took a $4.5 billion writedown on H20 chips destined for China, because of the Trump administration's moratorium on AI chip sales in that country (which has since been lifted). Without that charge, EPS would have been $0.96, a 57% increase. Make no mistake: It was the continuing adoption of AI that drove the robust results, as revenue from Nvidia's data center segment climbed 73% to $39 billion, representing 89% of its total revenue. Management expects Nvidia's growth spurt to continue, albeit at a more moderate pace. For its fiscal 2026 second quarter (ended July 27), management is guiding for revenue of $45 billion, which would represent year-over-year growth of 50%. Wall Street is equally bullish, with analysts' consensus estimates calling for revenue of $45.68 billion and adjusted EPS of $1.00. While this would represent a minor slowing compared with last quarter's robust growth, it would still be remarkable nonetheless. Same customers, expanding opportunity The biggest concern among Nvidia investors is that the adoption of AI will hit a wall, but there's simply no evidence to back that assertion. In fact, all the available evidence suggests the proliferation of AI continues. Amazon Web Services, Microsoft Azure, and Alphabet 's Google Cloud, are collectively known as the "Big Three" in cloud computing, and each has recently revealed plans to increase infrastructure spending this year, beyond the already robust spending that was previously announced. Furthermore, most of that spending will be allocated to additional data centers to support the growing demand for AI -- most of which will run on Nvidia GPUs. In addition, Meta Platforms also announced that it was increasing its capital expenditure spending plans for the year. The totals are enlightening: Amazon: $118 billion, up from $100 billion. Microsoft: $100 billion, up from $80 billion. Alphabet: $85 billion, up from $75 billion. Meta: $69 billion, up from $62.5 billion. It's no coincidence that these four companies are also Nvidia's biggest customers. Add to that the resumption of H20 chip sales and China, and it appears clear that Nvidia's AI opportunity continues to expand. Should you buy the stock before Aug. 27? To be clear, I expect Nvidia stock to remain volatile, driven by the inevitable ebbs and flows of AI spending. That said, its success thus far has been undeniable. Over the past three years, the stock has gained 882% (as of this writing) but has also fallen as much as 37% -- so it isn't for the faint of heart. This helps illustrate one of the hallmarks of investing success: Treat buying stocks as partial ownership in a business, own stocks in the best companies out there, and commit to holding for at least three to five years. That takes us back to the main question: Should you buy Nvidia stock before Aug. 27? The unspoken question here is whether Nvidia stock will be up or down following the release of its highly anticipated quarterly report. Truth be told, I have no idea, nor does anyone else for that matter. My crystal ball has been on the blink for some time, but if I were in the mood to prognosticate, I would feel comfortable making several very vague predictions: Nvidia will announce yet another in a long and growing series of quarterly revenue records. Given the company's track record of exceeding expectations, I suspect it will beat analysts' consensus estimates, which are calling for sales of $45.68 billion -- which is slightly ahead of management's guidance of $45 billion -- and adjusted EPS of $1.00. Beyond that, it's anyone's guess, and my predictions could be way off base. That said, I'm still extremely confident that my investing thesis for Nvidia remains intact. The company's cutting-edge GPUs are still the gold standard, driving the AI revolution, and rivals have yet to challenge its position as the undisputed market leader or come up with a superior product. The specter of competition remains, as there's always the possibility that a technological innovation could steal Nvidia's thunder. Most experts agree that it's still early innings for AI, but there's no consensus about the size of the market. Even the most conservative estimates start at $1 trillion. Big Four accounting firm PwC estimates the total economic impact at $15.7 trillion between now and 2030. The truth is nobody knows for sure. Nvidia stock is currently selling for roughly 30 times next year's earnings. However, that premium is backed by the company's track record of innovation, industry-leading position, and history of growth. This underpins my confidence that the runway ahead is long. For those who believe that the AI revolution will play out over the next decade and Nvidia will maintain its position as the leading provider of AI chips, the answer is clear. We don't know what the stock will do between now and Aug. 27 and for long-term investors, that doesn't matter. We'll simply buckle up for the bumpy (and profitable) ride ahead. Should you invest $1,000 in Nvidia right now? Before you buy stock in Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of August 4, 2025
Winnipeg Free Press
2 hours ago
- Winnipeg Free Press
Company advised by Trump sons said it hoped to benefit from fed money, then took it back
NEW YORK (AP) — A public document filed by a company that just hired President Donald Trump's two oldest sons as advisers included a sentence early Monday that said it hoped to benefit from grants and other incentives from the federal government, which their father happens to lead. But when The Associated Press asked the Trump family business about the apparent conflict of interest, the document was revised and the line taken out. Eric Trump and Donald Trump Jr. are getting 'founder shares' worth millions of dollars in New America Acquisition 1 Corp., a company with no operating business that hopes to fill that hole by purchasing an American company that can play 'a meaningful role in revitalizing domestic manufacturing,' according to to the filing. The president has geared his trade policy toward boosting manufacturing in the U.S. The original version of the securities filing said the target company should be 'well positioned' to tap federal or state government incentives. That reference was taken out of the revised version of the filing. The Trump Organization didn't reply to a question about whether New America still planned to benefit from government programs or why the line was cut. But the outside law firm Paul Weiss that helped prepare the document sent an email to AP saying it was 'mistake' made by 'scriveners,' an old term for transcribers of legal papers. Kathleen Clark, an expert in government ethics, said any excuses are too late because the Trumps had already tipped their hand. Monday Mornings The latest local business news and a lookahead to the coming week. 'They just deleted the language. They haven't committed not to do what they said earlier today they were planning to do,' said the Washington University law professor and Trump critic. 'It's an attempt to exploit public office for private profit.' New America is what's know as a special purpose acquisition company, or SPAC. It's a publicly traded company that exists solely to use its funds to acquire another company and take the target public. New America plans to raise money by selling stock on the New York Stock Exchange at $10 a share. That will hand the two Trump sons a total of $5 million in paper wealth on the first day of trading. The company hopes to sell enough shares to raise $300 million, which it then plans to use buying a yet unidentified manufacturer. A press release issued by New America saying it was focused on 'American values and priorities.' It made no mention of the aim to get government incentives. The filing to New America's potential new investors to Securities and Exchange Commission was explicit about what it was looking for in target company. It said, among other things, it would that can ride 'public policy tailwinds' by benefiting from federal or state 'grants, tax credits, government contracts or preferential procurement programs.'
