Less Spectacular International Stock Gains in 2010, says S&P Outlook

Overseas Markets will continue to moderately outperform U.S. in 2010, says Dec 23, 2009, S&P Outlook – 2010, Annual Forecast. So far in 2009, developed overseas markets scored a 26% return in U.S. dollars and emerging markets returned a more spectacular 68% return. Much of the return was attributed to the weakness in the U.S. dollar which makes foreign stocks worth more.

Fueling the expected, 2010 foreign stock market gains is a 28.8%, anticipated rise in developed market earnings. In emerging markets S&P expects a 27% 2010 earnings rise. S&P expects international stimulus, liquidity to moderately weaken the U.S. dollar in 2010.

Reasonable P.E. ratios on 2010 earnings, of 13.6 for developed overseas markets and 12.8 for emerging markets will keep moderate gains intact.

In developed markets S&P suggests overweighting in consumer discretionary, technology, and materials. Similarly, in emerging markets S&P would overweight technology, and materials, with financials added to the mix. As liquidity dries up when the international stimulus is removed expect the dollar to rebound perhaps later in 2010 or beyond.