Going Global

"I have learned how to live--how to be in the world, and of the world."
--Sabrina Fairchild (Sabrina)

Liz Ann Sonders presents a series of charts suggesting that, in the most recent quarter, companies with more international exposure had worse earnings. Just one quarter worth of date, of course, but we expect that going global should increase returns?

Higher global exposure = worse earnings/earnings (most pronounced in tech & materials) @FactSet pic.twitter.com/TTEj9dTxUK

— Liz Ann Sonders (@LizAnnSonders) October 28, 2019

One view suggests yes. Companies expand production to other countries because they sense higher returns on capital. But data such as the above demonstrates that may not be realistic.

Another view suggests that, instead of increasing returns, going global smooths them out. When returns are low in, say, Asia, they may be high in Europe or in the US. Diversification--in securities, in skills, or in markets--hedges risk of being too exposed to a single set of circumstances in an uncertain world.