Morningstar Advisor - December 2013/January 2014 - (Page 51)

headwind. We continue to have political ups and downs in resolving Europe's sovereign debt problems. We still hear some nervousness about China's economic growth and the lack Figure 1: Relative Volatility Has Tended to Converge Rolling Five-Year Standard Deviations of International Equity Benchmarks Minus the S&P 500 Index, 1982 Through 2012 likely that the markets are going to continue MSCI EAFE Index MSCI Europe Index MSCI Paciﬁc Index 16 12 going up in a straight line. Still, we don't think international equity markets are overvalued for the long term. While there have been more attractive entry points in the recent past, we still view equities as largely undervalued. Basis Points of transparency there. Given all that, it isn't 8 4 0 -4 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Sources: MSCI and Standard & Poor's, analysis by T. Rowe Price. Q: U.S. investors still appear to have a strong home bias, in part because they perceive international stocks to be significantly riskier than U.S. stocks. Are they right? Q: Which international sectors or industries have the most attractive value opportunities? on-we think correctly-is consumer staples. A: It's true that international equity investing A: The three that stand out are consumer place much faith in forecasts of a cyclical discretionary, industrials and business upturn in revenue growth. Health care stocks services, and technology. We think these are have also done well and do not look cheap places where developed market investors can anymore. Health industries have the problem involves additional, speciﬁc risk factors for U.S. dollar-based investors: exchange rate risk, political risk, legal standards, and so forth. And if there's one thing we've learned over the still ﬁnd good value, on both a relative and past decade, it's that global equity markets absolute basis. And if investors are prepared to are now so tightly connected that volatility take risks, they can still ﬁnd value in banks. episodes aren't likely to be limited to just among the developed markets, and we expect investors have been extremely reluctant to that governments account for a big chunk of their end market, and they are extremely anxious to restrain costs. Q: Are there any sectors or industries you see as relatively less attractive from a value perspective? this trend to continue for the long term. Defensive sectors, in general, are stretched as A: The one that many people are focused one country or region. We've seen a deﬁnite convergence of risk characteristics, especially If you are seeking international diversification for your clients, the T. Rowe Price International Growth & Income Fund may be a smart choice. Find out more at troweprice.com/world. Call 1-800-638-7780 to request a prospectus, which includes investment objectives, risks, fees, expenses, and other information that you should read and consider carefully before investing. All charts are shown for illustrative purposes and do not represent the performance of any particular security. Past performance cannot guarantee future results. In addition to the inherent risks of investing abroad, including unfavorable currency exchange rates, is the possibility that a stock judged to be undervalued may actually be appropriately priced. T. Rowe Price Investment Services, Inc., Distributor. 05515-2488 137154 http://www.troweprice.com/world http://www.troweprice.com/world

Table of Contents for the Digital Edition of Morningstar Advisor - December 2013/January 2014

Morningstar Advisor - December 2013/January 2014
Contents
Contributors
Letter From the Editor
What’s Your Purpose?
Working for Gen Y
How to Allocate College Savings
Mobius Looks to a New Frontier
Investments á la Carte
Investment Briefs
How to Manage Bonds for Today and Tomorrow
Cloud Is the New Engine of Growth
Knowing Where to Look
Economic Vulnerability Varies by Country
Factor Investing in Emerging Markets
Following the Rules
Exploring Indexing’s Next Frontiers
Frequent Fliers
Family Blind Spots
Optimal Portfolios for the Long Run
Finding Value in a Pricey Sector
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Emerging-Markets Roller Coaster

Morningstar Advisor - December 2013/January 2014