July 30, 2020
Historically, value has outperformed growth over the long term whether among domestic or international equities, or large-caps or small-caps.1 The chart below illustrates the long-term outperformance of the MSCI EAFE (Europe, Australasia, Far East) Value Index versus the MSCI EAFE Growth Index since inception of the indices.
Amid this long-term trend, we find international value investments currently offer attractive low valuations and a yield premium. As of June 30, 2020, the MSCI EAFE Value Index had a price-to-earnings (P/E) ratio of 11.34 and a dividend yield of 2.95%, compared with a P/E ratio of 26.25 and dividend yield of 1.62% for the MSCI EAFE Growth Index.2
Long-term capital appreciation
Growth of $100,000 from Dec. 31, 1974-June 30, 2020
Past performance does not guarantee future results.
Source: Morningstar, for the period Dec. 31, 1974 to June 30, 2020. Charts shown throughout are for illustrative purposes only and not meant to predict actual results. Chart is for illustrative purposes and is not representative of the performance of any specific investment.
1Source: Fama and French, et al.
2Source: MSCI: MSCI EAFE Value Index; MSCI EAFE Growth Index.
What this means for investors
Given the historical perspective of the long-term outperformance of value, combined with the seemingly attractive valuations currently available in international value, we believe now may be an especially good time for US investors to consider adding to their exposure in international value equities.