Advisors Warm to International Stocks as U.S. Gets Top-Heavy

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PIEQ
FIDI

Advisors are warming to international stocks heading into 2027, according to a panel at Thursday’s 2027 Market Outlook Symposium. VettaFi’s Head of Research Todd Rosenbluth hosted the session, citing growing demand for international strategies from advisors and investors.Key Takeaways: Europe’s developed markets rose slightly during the last three sharp AI sell-offs, while the S&P 500 slipped. Principal’s PIEQ holds about 35 stocks and favors biotech and international banks over thematic trades. Fidelity’s FIDI yields about 4.3% and overweights energy and utilities, sectors that tend to do well late in a cycle. Rosenbluth was joined by Bobby Barnes of Fidelity Investments and Matt Peron of Principal Asset Management. A live poll during the session found most attendees maintaining their exposure, though more viewed the asset class as attractive than unattractive. U.S. concentration is one reason to look abroad, said Barnes, Fidelity’s head of quantitative index solutions. The 10 largest names now make up more than 40% of the S&P 500. That has happened only twice before, during the Nifty Fifty era and the dot-com bubble. The U.S. market is also heavily weighted toward AI. See more: ETFs & Nvidia: Midterms, Investigations & Dip Buyers Peron, deputy chief investment officer at Principal, pointed to how Europe has held up. In the last three sharp AI sell-offs, an AI index fell by double digits, he said. The S&P 500 slipped by low single digits, while developed markets in Europe rose slightly. “So they’ve been very resilient to the AI trade when that falters,” Peron said. Peron said earnings have also fueled the rally. Many non-U.S. companies have as much exposure to the AI build-out as their U.S. peers, while still offering “good growth for a reasonable price.” Barnes noted that global earnings forecasts for 2026 have risen since the start of the year. That rarely happens outside a recovery from recession, since analysts usually start the year too optimistic and trim estimates from there.Where International Managers See OpportunityPrincipal picks stocks from the bottom up, focusing on individual companies rather than countries or themes, Peron said. The Principal International Equity ETF (PIEQ ) holds about 35 stocks, more concentrated than the mutual fund version, the Principal International Equity Fund (PINIX). The team likes biotech, Peron said, since about $500 billion in big pharma revenue is losing market exclusivity. As a result, drugmakers need to refill their pipelines. He also favors international banks, which have high and rising returns on equity but still trade at a discount. “We won’t go into something because it’s the latest craze. In fact, we often will lean against that,” Peron said. Fidelity, meanwhile, is focused on cheaper stocks, Barnes said. The Fidelity International Value Factor ETF (FIVA) buys low-priced developed market stocks while keeping a sector mix similar to the broad market. That tilts the fund toward banks, which can benefit as central banks raise rates. The Fidelity International High Dividend ETF (FIDI B-) instead overweights energy and utilities, which Barnes said tend to do well late in an economic cycle. The fund yields about 4.3%, compared with roughly 5% for the 10-year Treasury. Barnes also urged advisors to “know your bets.” Sector makeup drives more of the return from investing overseas than country choice. Advisors who favor financials over tech will naturally lean international, where financials make up a bigger share of the market. For more news, information, and analysis, visit the Equity ETF Content Hub.

Advisors Warm to International Stocks as U.S. Gets Top-Heavy

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