Education & Information
International Indicators
Most investors associate the international equity markets with high risk. Statistics show that the foreign markets in the developed countries are not much more volatile than the U S markets. There are extended periods of times in which the international markets will perform better than the U S market and vice versa. Most investors do not have a reliable method of analyzing these trends to know when they are changing. Positioning some of your investment portfolio in international markets as they are beginning a 3 year advance can be very rewarding.
The same forces that move the U S markets move the international markets, supply and demand. In 1997, the good people at Chartcraft developed three International Bullish Percent Charts, Asia, Europe and Latin America. They have been a valuable tool in helping us manage our international allocations.
Just like any other bullish percent chart, they help us analyze the supply and demand relationship as well as the risk level in the foreign markets. Shown below is the Asia Bullish Percent Chart. As you can see, there was a strong buy signal in 1998. You might recall the Asian financial Crises that year. That was a great time to put your international investments in Asia. The chart then advanced up to a high-risk level in April 1999 and reversed down in July 1999. That was a strong sell signal and good time to liquidate your Asian holdings. The Asian market went into a multi year decline and got back to a low risk level. Currently it appears this chart is beginning to advance indicating it is once again a good time to invest in Asia.
Using this chart you can see that you would have had a clear indication to buy as the Asian markets were advancing and a clear indication to sell as they went into a long decline. This is a great tool to help guide your international investment decisions.
