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Welcome to Soundbites, weekly insights on market trends and investment strategies, brought to you by Investment Executive and sponsored by Canada Life. For today’s Soundbites, we’re talking to Seth Weingram, senior vice president, director, client advisory with Acadian Asset Management. We talked about equity positioning in uncertain times, why geographic diversification matters, and we started by asking about what is changing that could favour non-U.S. equities in the current moment.

Seth Weingram (SW): The market has already been favouring non-U.S. equities for a little while now. In 2025, for example, U.S. returns lagged those of all of the other G10 countries, and EM outperformed the U.S. by 17%. And that U.S. underperformance has continued in 2026. So, what’s changed? I’d cite three factors, one of them being that the rest of the world has seen improved earnings growth relative to the U.S., benefiting from relatively heavy weightings in financials and industrials, and that includes defense stocks. Second, the market has given some credit to those improved fundamentals in non-U.S. valuations finally, whereas tech heavy U.S. valuations have been buffeted by sudden swings in investor sentiment. And finally, there’s been some recent abatement of the dollar strengthening, which had been a pretty strong trend since the global financial crisis.

Where he’s finding compelling opportunities

SW: I would advocate for really well-diversified overweights across both EAFE [Europe, Australasia, and the Far East] — so developed markets outside of North America — as well as emerging markets. Dispersion in the top-down forecasts of our predictive models across EM countries highlight one very telling theme. And that’s that we like countries where fundamentals have been ahead of market expectations so far, and that has justified valuations and fueled positive sentiment. Those are countries like Taiwan and Korea. On the other hand, in EM, we’re negative on India. That’s a place where valuations continue to look quite rich, while fundamentals and sentiment look neutral to weak. One thing that I would caution investors against is glomming on to speculative froth. It’s still quite evident in the market, and I think that dispassionate investors will be rewarded for taking the other side of what I still see as expensive growth stocks with highly uncertain fundamental prospects. One other potential thing for investors to think about is investing in what I would call low-risk stocks, or stocks that have low market betas. Evidence shows that over time, these stocks have returned performance in excess of their risk, and they provide some cushion against downside market exposure. We’re living in a world, again, where high levels of uncertainty warrant thinking about those investments in lower-risk equities.

The case for international equities

SW: When we think about the case for international equities, one of them is valuation. On a price-to-forward-earning basis, both DM ex-U.S. and EM are still historically cheap compared to the U.S., even though there are signs that the gap in earnings growth has shrunk. So fundamental earnings growth in the rest of the world has improved, and it’s not clear that that’s fully incorporated into relative valuations. But the other piece of the argument for non-U.S. equities is that high level of uncertainty in the world around us. The historically high weight of the U.S. in the global market portfolio is consistent with an expectation that the U.S. market is going to outperform the rest of the world by a few percentage points a year. And if, given the high level of geopolitical, economic and policy uncertainty in the world today, you’re not so confident in that kind of outlook, then overweighting the U.S. in EM might seem in order.

Whether geographic diversification still matters

SW: As you think about global mega-caps, there is something to be said for the notion that where they’re domiciled doesn’t really matter. There are mega-cap technology companies in Asia, in emerging Asia, and Taiwan and Korea, for example, that seem every bit a part of the developed market ecosystem as mega-cap technology companies that are based in California. Nevertheless, geographical diversification is still important to a well-designed portfolio. There are markedly different industry exposures across geographies. For example, the mega-caps that happen to be domiciled in Europe, they’re just not the same as the mega-caps in the U.S. or some of those mega-caps in EM. In addition to some of these natural sort of long-standing differences, correlations among regional indices have come down, which suggests that renewed tailwind for benefits of geographic diversification is growing. And I would add that while geographic diversification is still certainly valuable in general, it’s especially true in the small-cap market segment. Not only are small-cap stocks less sensitive to global drivers of returns, but they also tend to be less efficiently priced. And as a result, are a key source of stock-picking opportunity.

And finally, what’s the bottom line on equity positioning in uncertain times?

SW: As a result of the strong U.S. performance relative to the rest of the world for a prolonged period, we saw institutional investors give up on emerging markets. We saw institutional investors downweight non-U.S. equities. But we’re living in a very uncertain world. Predicting regional outperformance going forward is very difficult, and I can summarize my takeaway for designing global portfolios at this point as diversify, diversify, diversify. Don’t give up on diversification. Don’t lose faith in it. It’s going to be your friend in the long term.

Well, those are today’s Soundbites, brought to you by Investment Executive and sponsored by Canada Life. Our thanks again to Seth Weingram of Acadian Asset Management. Visit us at investmentexecutive.com, where you can sign up for our a.m. newsletter and never miss another Soundbite. Thanks for listening.

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