Jasmine: Last question. At BlackRock, we’re already seeing increased interest from clients in diversifying and expect this trend to persist through the remainder of 2020 and beyond. What else should investors know about diversification and international investing?
Jenny: Several forces could drive the correlation between U.S. equities and international equities lower in the next few years.
The renewed geopolitical tensions between the U.S. and China is exacerbating deglobalization trends and leading to more bifurcated supply chains. The increased weight of domestic sectors such as consumer, health care and technology versus the role of more globally correlated sectors such as energy and materials could also contribute to more divergent outcomes across countries.
Even without a drop in correlations, diversification benefits can come from other aspects such as foreign currency holdings and from the diverse sector, factor and style exposures which international investing offers.
Jasmine: Thanks so much for speaking with me, Jenny.
iShares Core MSCIEAFEETF – IEFA
iShares MSCI Intl Quality Factor ETF – IQLT
iShares Core MSCI Emerging Markets ETF – IEMG
iShares ESG Aware MSCIEAFEETF – ESGD
1. Source: BlackRock, Portfolio Solutions (as of June 2020.)
2. Source: iea.org (As of August 2020.)
3. Source: BlackRock, US Department of commerce, Euromonitor, OC&C Strategy Consultants (as of December 2019.)
4. Source: BlackRock, iResearch (as of December 2019.)
5. Source: MSCI (as of July 2020.)
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