Is now the time to invest in international stocks?

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Last year, we saw almost all major international markets outperform the US and, you know, after 15 years of, uh, having outperformance, now other markets, I think, will catch up on the US market because in terms of valuations, the US is a bit more expensive than other markets.

0:29 spk_1

So David, share with our listeners and viewers why we’re starting to diversify our personal investments a little bit away from the United States. Yeah,

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well, international markets have outperformed US markets, and since the beginning of 2025, it seems like a lot of US once closest allies have slowly began selling US Treasuries and have talked about repatriating their gold, and that leads us to today’s guest.

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Welcome to the not so fabulously.Where we make heads or tails of stock market and demystify cross-border investing for international investors.

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Pedro Linois the Lisbon-based CEO and CIO of Optimized Investment Partners with a passion for global asset management and Golden Visa Investment Solutions. A

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seasoned economist with a degree from Nova School of Business and Economics and leadership roles in Optimize NDIF broker, Pedro also serves on the Portuguese Diaspora Council and helps demystify cross-border investing for international investors.Welcome to the show, Pedro.

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Thank you so much for having me on the show.

1:33 spk_1

Of course, we’re happy to have you. So, many Americans still sort of assume that the US always wins in, in investing these days. Why is that belief becoming more outdated, would you say?

1:46 spk_0

Well, first of all, the US hasn’t stopped being innovative. What, what is, uh, what happened is that it’s much more concentrated, expensive, and more cyclical. Non-US asset assets often trade at lower multiple, especially because the last 15 years, the US market performed really, really well. But last year, we saw almost all major international markets outperform the US andYou know, after 15 years of, uh, having outperformance, now other markets, I think, will catch up on the US market because, in terms of valuations, the US is a bit more expensive than other markets. So, I think, uh, on top of that, there is also some loss of confidence, as you mentioned, and trust in the US asset may be due to the high debt and some policy changes that we had in 2025.

2:44 spk_1

Yeah, so to your point, data shows that despite the S&P 500 rising about 17% last year, the US didn’t even rank among the top 10, and I think it was even lower than that in returns for similarly sized economies and markets. When we say global markets outperformed, what did that look like more specifically and which regions are you seeing that are doing the outperforming the most?

3:07 spk_0

So last year it was an exceptional year. Europe did much better than the US, around 15% in euros.They went inter into dollars, more than 13%, 30% because the dollar was down around 14 to 15% of the euro, but even within Europe, Southern European was much better than the, the major and developed European markets. For example, Portugal, Spain, and Italy, they outperformed and they returned over 30% in euros.And why is that? Because over the last about 13 years ago we had the intervention of the IMF in Europe. There was the European debt crisis, and Portugal, Spain, and Italy, and they had to reform their economies, and now, and now they are growing a lot. So financial utilities, utilities and tourism.And energy transition were the keys for the success last year. Also, China, Japan, Latin Latin America, and some emerging markets were the big outperformers last year. I think it’s all about the quality at the discount. And as I mentioned, the other markets are at, uh, were trading at a discount, and I think now investors are paying attention to them.

4:30 spk_1

Yeah, so, if you’re just tuning in, this is Living Not So Fabulously where we mix international investing with a spoonful of reality. We’re speaking with optimized Investment Partner, CEO and CIO Pedro Lino. So, you’ve touched on this a little bit in your last answer. How have tariffs, trade uncertainty, diplomatic volatility here in the United States, um, affected, uh, US stocks specifically on a global stage?

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Well, policy friction and uncertainty raises equity risk premium.And what happened last year with the tariffs, uh, inflation risk increased, margin pressure in companies also increased because, uh, the companies face, uh, tariffs, and some of them have to absorb, uh, percentage of that, uh, those tariffs. Also, trade fragmentation undermines global supply supply efficiency. So what happened was,Uh, uh, change in, in the global trade, uh, that we, that we, that we thought we had it, uh, right over the last decades or so, and we thought these people might pick volatility, this increases the policy risk. It’s not only the market risk that is increasing, but also the policy risks. So, what I think is thatThe people are starting to quietly, quietly reallocate their capital, especially in the US and especially many Americans that have, uh, at the great decades of returns.

6:06 spk_2

Yeah, so Pedro, it, it sounds to me like what you’re saying is that, uh, that, especially for American investors, um, we’re starting to see the effects of uh uncertainty broaden out.Um, there’s always been a level of uncertainty in markets, right? But it seems like this is now broadening out to something that’s a little bit more geopolitical, uh, um, and, uh, and that additional risk means that individuals are probably going to be expecting a better return. When there’s more risk, they want a higher return.Does, does he, do you think that that’s one of the real headwinds that uh uh or, or the reasons why Americans may be looking to other markets, is that they’re just basically saying I’m, I’m gonna take a step back from US investing?

6:55 spk_0

Yeah, look, this kind of risk is a bit different because if you have a political risk or uncertainty about trade policies, this risk is not a good one. It’s the one that creates volatility and after the packet of outperforming and excellent returns, it might end, uh, with some, uh, years with not so good returns. For example, the last few years for the S&P 500, you had, uh, appreciation of more than double digit, which, which was excellent.But now with all this uncertainty, what we have isFewer foreign buyers of, uh, for example, treasury bonds, as you mentioned, for example, the Danish pension fund, they, they sold all the treasures that they have. Of course it’s only $100 million but there is the intention and the reputation that the dollar is now having, which is not a good one.So if we have, if you have long-term partners, uh, especially European partners that are now selling the dollar, then the demand for the dollar weaken, and that means that the bond yields rise. And what the Fed can do, they can control interest rates on the short term, but not on the long term. And what you are seeing that long-term interest rates, especially with the 10-year on the or the even the 30-year yield.Uh, they are at the highest of the last years. So you have the 3-year yield at around 5%, 4.85%, which is really, really high. And basically, if the demand of dollars falls, then these yields will be maintained high. So what I think is that, uh, global global investors are trimming their allocations in the US because they were really overweight.And what they have, what they are now doing is also diversifying from US dollar assets indirectly through ETFs, international ETFs, but also through dual custody. Many clients are now jumping into Portugal or other jurisdictions to buy, uh, European, uh, assets, and basically, they can use it directly, uh, uh, they can invest directly or some of them use their also their IRA account, butThe, the, um, what is most important is, uh, is that American investors are waking up into this diversification outside the US.

9:24 spk_1

So, I’m, I’m curious, Pedro, your opinion on, you know, you’re, you’re mentioning a lot of variables as to why international markets are becoming more appealing to all investors, uh, US investors as well as international investors. Um, but you, the United States having too much debt is not a new problem. Um, the United States having a high inflation has, you know, been kind of the norm since 2020, as is much of the globe. So some of these variables have been around for years.Um, there seems to be one variable that is relatively new. Um, and it’s, after watching Davos last week, as of the time of this recording was last week, um, it almost seems like there’s, there’s one variable that has finally said, told everybody, hey, we’ve got to reposition, uh, our, our investing strategy. We’ve got to reposition ourselves financially as individuals and as companies. Would you agree that it’sWe probably wouldn’t be here had we had a different outcome in the 2025 or 2024 election.

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Well, in terms of policy intensity, for sure, because what happened last year, if you take a look after the tariffs were imposed March last year, it was when the dollar started to drop, and it dropped 14% after that after that policy change which affected the Europeans and not only the Europeans, but that the largest trade, trade partners with the US.And for some reason, some countries that are not aligned with the US were were not imposes so high tariffs, so that changed the approach of the partners and the allies that were traditional allies, allies from the US. And what happened is that after that change in policy, which is a more stronger policy and many times against the allies.The dollar started to fall, so I do think that this, uh, the outcome of the election actually started a new era for us in Europe. We will have to get used to it because it has become, it has become more difficult to manage sometimes the different messages that you get every day. Sometimes it’s left, the next day it’s right.But, uh, look, what we have to keep focus and, uh, in terms of managing our portfolios, what we have to understand how we can protect from the.Uncertainty and volatility. So we had the, the tariffs that were imposed on that actually made imported goods much more expensive for the US. And now what I think the administration wants is the second derivative, which is the dollar devaluation because it’s the only way that can, they can tackle the the trade deficit gap, as you mentioned, it has been for a while.But the first step, I think it was tariffs.And the second one is dollar devaluation because it’s the only way that I think they will have to.To balance that trade, but, uh, look for, for US for American investors, this will not be good because actually what you’re doing, you are losing purchasing power when comparing with other countries.It’s not the end of the world because uh if you take into perspective the last 25 years, the dollar was trending at low, as low as I think 62 cents on the euro. Now, uh, it’s already got around 80 something cents.But what I think it will happen in the next year or so is that we can go down to 71 cent. So I think that the dollar will come down 50% more and basically John and David, due to this uncertainty and, and the lack of buying of US assets, especially from long-term allies.

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Gotcha, gotcha. So, one moment, Pedro, we’ll be right back after this quick break.Welcome back to Living Not So Fabulously. We’re back talking with Optimized Investment Partner, CEO and CIO Pedro Lino. So, Pedro, based on what you’re seeing today, how do you expect international markets to perform relative to US markets, uh, starting in 2026 and beyond? You just gave us a prognostication for the dollar. What about, uh, the stocks?

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Well, I think that, uh, we should expect the trends that we saw in 2025 to proceed. So I would, I would expect the related outperformance outside the US comparing with the US.Uh, even though the absolute return in the US markets might remain positive, I, I have to remember that the US market had 3 exceptional years with more than double-digit returns, but I still think that the US market can close the year higher, but, uh, you have these two, risks, the dollar devaluation.And, um, and also the, the uncertainty of the policy. That’s why I think Europe, Japan will, will be beneficiary even because their valuations are really low, so there is a rerating of this valuation and also some selective emerging markets, for example, Argentina, India, and even China. So I think that the next decade will not be.And the US, it will be much more like pro-diversification, and I think it, it is the right thing for the, uh, for an investor to do is protect themselves and diversification, it, uh, I think it’s.

15:32 spk_1

Absolutely, yeah. So, Pedro,

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uh, just out of curiosity, you, you talked about, um, the dollar continuing to drop, and we know that you are an investment professional in Portugal, and it seems like Portugal has attracted a lot of attention.Does the fact that the dollar continues to drop mean that holdings in foreign countries like the Portuguese market, when the dollar drops, that, that the value of those assets go up in proportion to the dollar dropping, even if that market doesn’t actually outperform the US. There’s a possibility it’s still, you as an investor, could still outperform the US just because of the drop in the dollar.

16:20 spk_0

That’s absolutely right. So, even if the evenEven if the European markets go return zero, if you have a depreciation of the dollar around 15% as a US investor, actually we are making 50 15% because of the forex, the foreign exchange. So, yes, you are absolutely right. So in, in, um, in, um, a time, uh, and if we predict that in the next couple of years the dollar will go down, which I think it will, um,And going down, it doesn’t mean a crash. It means that a correction. We had, we had the dollar coming up and appreciating over the last, I think, 18 years. So since 2008, the dollar has been appreciating against the euro. So.It is time also that the, that the dollar takes a breath, and I think that US investors, must take that into consideration. And if they invest abroad, even if those markets return zero, you are making money.

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So, then, uh, because it, it seems like Portugal has been an attractor uh in this, uh, I think what you’re, the, uh, Portuguese market was, uh, what I saw was the number 3 performing market in the globe. What do you think is the reason why there’s, there are assets flowing into Portugal versus uh maybe some other countries?

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Well, Portugal combined stability, access, and also undervaluation.Uh, it’s a rare drill and basically, uh, Portugal is a peripheral market within the European Union. So it always trade at the discounts regarding the major markets, major European markets. But the companies are very good company. We have, uh, very well managed companies that pay also very nice dividends because, uh, as we are a peripheral market, the companies, in order to attract pension funds and investment funds like BlackRock, the Norwegian Central Bank, they pay a very good dividend.So we have companies that actually pay between 5 to 8% dividend in euros per year. So that’s what makes this market a small gem that is being discovered by international funds, uh, and also some by pension funds. And the golden visa program that was, uh, applied, it built in place, the, it’s via capital market instruments. So you can buy an investment fund.That is eligible for the golden visa program. It has to invest more than 60% in Portuguese stocks, and that has been attracting many, many investors, especially from the US. Also, because Portugal is a, a European Union country, you have access to the single market, highly, uh, high safety and education metrics also.Uh, you have political stability within the European framework. So there’s the rule of the European rule of law, and for Americans, I think that the lifestyle, resilience, and without leaving the capital market, uh quality.Uh, it’s, it’s a plus because you, you can, you can still be invested in the, in the capital markets, making a good return, as you mentioned, the Portuguese market last year was up 30%. If you, on top of that, you add a 14%, uh, depreciation of the dollar, you are talking about 45% appreciation in dollars. So, Portugal has becomeI think a small gem and is being discovered by Americans. It’s an alternative for investment. Also, if it’s a small market and a very profitable one, I think it’s now just on the beginning of being discovered.

20:25 spk_1

Nice. So, correct me if I’m wrong, Pedro, cause you’re a smarter and better dressed man than I am.For years in the United States as an investor, we would look at, um, you know, being invested in US small, large, and medium cap stocks, a little bit of bonds and cash as sort of the core portion of our portfolio, and then investing in, uh, European markets and even, um, emerging markets would be considered a, like a core portion of your portfolio. But it sounds like everything I’m getting from you is that the world is changing, uh, is, you know, Mark Carney said.Um, and we need to start thinking of things differently. And if you’re a US investor and you still want to have a growth strategy, it sounds like we need to start thinking about how we can incorporate international investments, um, as more of a core portion of our portfolio and not necessarily look at all international markets as sort of an explore or an aggressive portion of our portfolio. Is that accurate?

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Uh, yes. So I think that the US investors have to start thinking about diversification in currencies, but not only currencies and markets, but also dual cost of it. So, uh, uh, uh, usually, uh, American investors have all their assets in US institutions, and you have to think about the Plan B or Plan C, which isWe have no clients that are asking if we can have uh accounts or management account with uh shares and bonds or financial instruments, uh, cost of it in Portugal. And what I think that, that, uh, we are, and the trend that we are seeing is that people are always also diversifying the cost of the, the countries.So this is also a plan because uh Portugal, as you know, is a member of the European, so you are, you are under the European regulation and you have diversification in years, you have dual custody possibility and also the possibility of accessing to a passport, so I think it’s an unbelievable opportunity to have a Plan B, and I think,For those that can and for all of us under this.world that is more and more volatile and empathy, uh, full of empathy, we, uh, thought that can be, this should be mandatory.

22:49 spk_1

Well, Dave and I could continue this conversation all day long, but I feel like the next time we continue the conversation, it has to be on the Mediterranean with some vino verde. So thank you so much, uh, Pedro, for joining us today. We appreciate it.

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Thank you so much for having me, and I hope seeing you in Portugal soon.

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We encourage you, especially if you’re retiring abroad or early like us, to follow in our footsteps and start considering with your financial advisor, of course, how you can incorporate more global assets into your portfolio.

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And if you’d like to learn more about the Optimized Investment Partners, Portugal Golden Opportunities Fund, subscribe to the Queer Money podcast on YouTube and our newsletter, as we’ll discuss more about that.Thanks for tuning in.

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This content was not intended to be financial advice and should not be used as a substitute for professional financial services.