Global Markets – 4Q19 Review

International developed equities (defined as the MSCI EAFE Index) posted a fourth-quarter gain of 8.2%, closing out 2019 with a calendar-year return of 22%. The 4Q upward trajectory in equities was in stark contrast to the selling vortex witnessed in the 2018 holiday season, as investor sentiment was buoyed by news of a pending trade deal between the U.S. and China, a continued accommodative posture by major central banks, and hopeful progress on the Brexit front with the landslide election of PM Boris Johnson.

Investment style played a material role in portfolio returns in 2019, as international growth stocks outperformed the international value counterparts by a wide margin (over 1100 basis points). Although Cambiar’s investment discipline provides some degree of opportunism to invest in growth companies, price sensitivity is an important consideration to the buy decision – thus a spread of this magnitude makes it a challenge to keep pace. It is worth noting that style divergence waned in the second half of the year, thus providing a more level playing field.

The end of 2019 also brings with it the closeout of the 2010s. The cumulative 71% return for international equities over the past decade is certainly solid on an absolute basis – but seems rather lackluster when compared to the 256% return for the S&P 500 Index. The below table provides cumulative returns for the past four decades:

	2010s	2000s	1990s	1980s
MSCI EAFE	70.8%	12.4%	96.9%	630.1%
S&P 500	256.7%	-9.1%	432.8%	403.8%

Home country bias certainly benefited investors in the 2010s; that said, extending the timeframe a bit illustrates the virtues of diversification within one’s equity portfolio. Given the decade-by-decade change in leadership in the above table, perhaps the coming decade will bring with it an improvement in investor sentiment towards international equities.

Disclosures

Certain information contained in this communication constitutes “forward-looking statements”, which are based on Cambiar’s beliefs, as well as certain assumptions concerning future events, using information currently available to Cambiar. Due to market risk and uncertainties, actual events, results, or performance may differ materially from that reflected or contemplated in such forward-looking statements. All information provided is not intended to be, and should not be construed as, investment, legal or tax advice. Nothing contained herein should be construed as a recommendation or endorsement to buy or sell any security, investment or portfolio allocation. Securities highlighted or discussed have been selected to illustrate Cambiar’s investment approach and/or market outlook. The portfolios are actively managed and securities discussed may or may not be held in client portfolios at any given time, do not represent all of the securities purchased, sold, or recommended by Cambiar, and the reader should not assume that investments in the securities identified and discussed were or will be profitable. As with any investments, there are risks to be considered. All material is provided for informational purposes only and there is no guarantee that the opinions expressed herein will be valid beyond the date of this commentary.

Any characteristics included are for illustrative purposes and accordingly, no assumptions or comparisons should be made based upon these ratios. Statistics/charts are based upon third-party sources that are deemed reliable; however, Cambiar does not guarantee its accuracy or completeness. As with any investments, there are risks to be considered. Past performance is no indication of future results. All material is provided for informational purposes only and there is no guarantee that any opinions expressed herein will be valid beyond the date of this communication.