VT: Global Stocks Eye A Bottom, Volatile Months Ahead

Aug. 03, 2022 10:52 AM ETVanguard Total World Stock ETF (VT)1 Comment

Summary

  • Global equities might have put in a bottom during June and July, but more work is needed to confirm the low.
  • Vanguard's Total World Stock Index ETF is a popular way to easily access global markets.
  • Foreign stocks look cheap, but earnings growth is seen best within the domestic market.

World Map 3D Render Topographic Map Color

FrankRamspott/E+ via Getty Images

I look forward to the J.P. Morgan Asset Management's Guide to the Markets each month. The version released on July 31 continues to show value among international stocks. This is nothing new. Foreign markets' price-to-earnings ratios are dirt cheap right now. But with inexpensive markets comes risk and weak momentum. Moreover, the rally off the June 17 low in the global stock market makes many investors nervous about putting cash to work at the moment. A popular ETF tracking the all-country index is the Vanguard Total World Stock Index Fund (NYSEARCA:VT). Let's dive into some charts to assess the playing field.

Kicking things off with returns and the All-Country World Index composition. Emerging markets have fared the worst, down more than 17% in USD terms through July 31. Once again, the S&P 500 is the best house on the rough street - down just 12.6% for 2022. Brazil has been a topsy-turvy market YTD but has managed a small gain on the year. The U.S. is now 62% of the global market, up from last year's composition picture.

SPX Leads Again YTD, A Growing Share Of The Total World Market

SPX Leads Again YTD, A Growing Share of the Total World Market

J.P. Morgan Asset Management

Ex-USA stocks sport a huge valuation disconnect (in a good way) versus domestic stocks. The MSCI All Country World Ex-U.S. Index is now more than two standard deviations cheaper than the S&P 500, according to JPM. Moreover, the foreign shares have a dividend yield of a whopping 1.8 percentage points above that of the SPX - that is massive relative to history.

ACWI Ex-US P/E Vs SPX, Yield Differentials

ACWI ex-US P/E vs SPX, Yield Differentials

J.P. Morgan Asset Management

Earnings matter, too, of course. Next year's and 2024's EPS growth is seen highest in the U.S. as cyclical areas represent less of the broad market. A global recession remains top of mind.

Global Stocks Are Cheap, But Earnings Growth Is Best Within The SPX

Global Stocks Are Cheap, But Earnings Growth Is Best Within The SPX

J.P. Morgan Asset Management

The Technical Take

Let's turn to the chart to see where price action might look like through the end of the year. I pulled the trailing 13-year seasonality chart from Equity Clock on VT versus the S&P 500. We all know that August and September (into early October) can be sketchy periods for the stock market. But vs the S&P 500, foreign shares tend to be weak now through the end of August before rebounding into October. Domestic equities are the place to be from late October through mid-December, on average.

VT Vs SPX Last 13 Years: Choppy Action Is The Trend Through Year-End

VT vs SPX Last 13 Years: Choppy Action Is The Trend Through Year-End

Equity Clock

For VT specifically, I see support at the February 2020 highs near $83. That level held on a pair of tests - in June and July, recently. Now, though, shares might find near-term resistance in the low to mid-$90s from key spots earlier in 2022. If VT can climb above $95, that would really support the case for a global bottom established from June 17 through July 14 on VT.

VT: Key Levels Above And Below

VT: Key Levels Above and Below

StockCharts.com

The Bottom Line

Global equities, using the popular VT index ETF as a proxy, are on breakout and bottom watch. The low to mid-$80s and low to mid-$90s are pivotal areas currently, as so many markets trade at cheap valuations, particularly outside of large-cap domestic areas.

This article was written by

CFA & CMT Charterholder | Freelance Financial Writer at SoFi & Ally | Investments | Markets | Personal Finance | RetirementI create written content used in various formats including blogs, emails, white papers, and social media for financial advisors and investment firms in a cost-efficient way. My passion is putting a narrative to financial data. Working with teams that include senior editors, investment strategists, marketing managers, data analysts, and executives, I contribute ideas to help make content relevant, accessible, and measurable. Having expertise in thematic investing, market events, client education, and compelling investment outlooks, I relate to everyday investors in a pithy way. I enjoy analyzing stock market sectors, ETFs, economic data, and broad market conditions, then producing snackable content for various audiences. Macro drivers of asset classes such as stocks, bonds, commodities, currencies, and crypto excite me. I truly enjoy communicating finance with an educational and creative style. I also believe in producing evidence-based narratives using empirical data to drive home points. Charts are one of the many tools I leverage to tell a story in a simple but engaging way. I focus on SEO and specific style guides when appropriate. My CFA and CMT backgrounds demonstrate prowess in investment management and my professional experience includes extensive public speaking and communication. Moreover, my extensive university teaching and professional trading experience provide useful skills. Past roles also include heavy use of Excel modeling and chart creation as well as PowerPoint.I am a contributor to The Dividend Freedom Tribe. I am a contributor to Topdown Charts.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Recommended For You

Comments (1)

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.