My wife Carole likes to gently admonish me from time to time, by saying: “It’s not all about you.” I sometimes feel like saying that to the Federal Reserve.

There’s more to investing than the Fed’s next policy decision. Dynamics other than the U.S. central bank’s inflation fight are affecting investors’ portfolios. You need to think globally.

The dominant news this week will be the December U.S. consumer price index (CPI) report, scheduled for release Thursday.

Accordingly, Wall Street has its eye on the next Federal Open Market Committee meeting, scheduled for January 31 to February 1. If the CPI data underscore a continuing deceleration of inflation, as expected, the FOMC might be motivated to ease up on tightening.

But it doesn’t pay to have a single-minded, hand-wringing obsession about the Fed’s every move and utterance. Free your perspective from domestic myopia. Think globally.

Which brings me to my colleague Nathan Slaughter [pictured here], the chief investment strategist of our premium trading services, Takeover Trader and High-Yield Investing.

As investors close out a terrible 2022 and embark on a hopefully better 2023, I decided the time was right to ask Nathan about international investments.

Americans tend to be parochial; it’s been ingrained in our nature ever since George Washington warned the new republic about foreign entanglements. But if you don’t have exposure to foreign equities in your portfolio, you’re leaving money on the table.

Let’s see what Nathan has to say about the big wide world of investments. My questions are in bold.

Why should investors maintain international diversification?

According to the World Bank, the United States accounts for about 55% of the world’s stock market value. That means 45% (more than $40 trillion) resides overseas. In fact, 80% of the world’s publicly traded companies are foreign-based, compared with 20% headquartered domestically.

So there are four times as many investment options outside our borders than within, many with two to three times the meager 2% average yield found stateside.

That’s why I tell investors whose portfolios lack international exposure that they’re only looking at part of the menu. You’re missing out on half of the world’s potential opportunities.

Give us a global view of opportunities right now, by sector and by specific stocks.

Take the financial services sector. We like to think that New York’s JPMorgan Chase (NYSE: JPM) is the world’s mightiest bank, with over $3 trillion in assets on the balance sheet. But it’s not even close. London’s HSBC Holdings (NYSE: HSBC), Japan’s Mitsubishi UFJ (NSDQ: MUFG), and China’s Industrial & Commercial Bank are all larger.

In fact, just four of the world’s 20 most powerful banks are based in the U.S. If you limit your portfolio to domestic stocks, you automatically eliminate the other 16 from consideration. And that’s a mistake, if for no other reason than the fact that MUFG offers more than double the payout of JPM.

The U.S. does have bragging rights to the world’s largest retailer in Walmart (NYSE: WMT). But France’s Carrefour (OTC: CRRFY) isn’t too far behind, with over $80 billion in annual sales. And Germany’s discount grocery chain Aldi has over 11,000 stores in 18 countries, more outlets than Albertson’s and Publix combined.

WATCH THIS VIDEO: Stocks Are Off to a Great Start in 2023

If you look at the world’s 30 largest retailers by sales, only 11 call the U.S. home, whereas 19 are headquartered in foreign countries from Australia to the Netherlands. Likewise, more than half (11) of the 20 biggest money-making pharmaceutical companies are based outside the U.S.

If you don’t have any overseas exposure, you could benefit from a powerhouse like GlaxoSmithKline (NYSE: GSK), which sports a robust dividend yield near 6%.

The story is the same across many other industries: steelmaking, mining, manufacturing, you name it.

What’s the track record of foreign equities compared to those based in the U.S.?

Guess how many times the S&P 500, which comprises U.S.-based companies, has been the world’s top performing index over the last 30 years? Zero. Not once. Foreign markets routinely outrun our own and those returns aren’t being skewed by one or two standout performers.

AllianceBernstein compiled some enlightening statistics on this subject. On average, three-fourths of the 50 top-performing stocks each year have been found outside the U.S.

My readers might recall that I’ve made some of these arguments before. After all, they ring true year after year. But international markets could have even more of an edge in 2023.

There are at least three key macro developments abroad that bolster the case for overweighting foreign stocks over the next 12 months: rebounding economic growth, resilient corporate earnings, and attractive valuations. If you haven’t already added some international flavor to your portfolio, now’s a good time to start.

Editor’s Note: My interview with Nathan Slaughter has given you invaluable investing insights, but I’ve only scratched the surface of the expertise on our team.

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John Persinos is the editorial director of Investing Daily. You can reach him at: mailbag@investingdaily.com.

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