Beyond home bias and the case for international equities

International equities have recently generated meaningful outperformance relative to U.S. equities, suggesting a material shift after an extended period of U.S. dominance. Host John Bryson is joined by Dean Bumbaca, CFA, portfolio manager at Axiom Investors, to discuss why international markets could continue to gain momentum and how global exposure can help investors capture these dynamic opportunities.

Dean shares insights into the most attractive investment opportunities as the global economy restructures. The conversation also touches on the AI trade, equity valuations, and the consequences of a weaker U.S. dollar for investors with U.S.-focused portfolios.

1 How would you describe Axiom’s investment approach?
Dean: At Axiom, we view the predominant, most durable factor that drives alpha in equity markets to be positive surprise. Our entire process is designed to spot inflections in businesses that will ultimately result in positive earnings surprises, coupled with an improving competitive advantage and deepening moats. We embrace buy and monitor, where new information proves or disproves our hypothesis.

2 Why should investors consider international equities in 2026?
Dean: U.S. market outperformance through the end of 2024 was fueled by the strength of the U.S. economy and the country’s edge in design. We believe the global economy is beginning to shift from the design era to a build era, where outsized growth comes from capital heavy enterprises. The winners of this phase are in Taiwan, Japan, Korea, and parts of Europe, where advanced manufacturing remains concentrated.

3 What are the specific regional opportunities available in international markets?
Dean: We have a large and increasing position in Japan. With the country’s dominance in materials science and scaled manufacturing, our companies are seeing strong demand for high performance specialty materials used in aeroengines and nuclear reactors. On top of that, the government has made structural changes to enhance shareholder return, improve return on equity, and valuation multiples.

We also see meaningful upside in defense and aerospace. Defense demand is supported by rising government budgets, while aerospace should benefit from stronger international travel, which increases aircraft utilization and drives higher maintenance needs.

In addition, we expect positive earnings momentum in European financials, supported by credible cost takeout programs that should translate into substantial capital returns over the coming years.