International equities have delivered strong returns since 2025, partly driven by US dollar weakness. With recent geopolitical tensions and energy market volatility, do you still see the case for continued strength in international stocks?
The conflict in Iran set off a flight-to-safety trade, with the price of oil and gas spiking following the closure of the Strait of Hormuz. If this becomes a prolonged conflict and oil prices remain elevated, it could become a challenge for countries that are heavy energy importers. Countries like China, India, and Japan will spend more on oil imports, their trade balances will weaken, and there will be more pressure on consumers. That will likely be reflected in stock prices in the near term. In our portfolio, we focus on strong, high-quality companies, and although their stock prices might be volatile in the near term, we believe their fundamentals will hold up. Long-term, we are quite optimistic on international equities and think the relative strength we saw in 2025 and the first two months of 2026 can continue.
With tariffs, currency moves, and geopolitical tensions driving market volatility, how are you thinking about risk in the portfolio today?
There has been no shortage of risk across international markets in recent years. A spike in oil prices will pose outsized risks for sectors like consumer discretionary and for countries that are more exposed to energy market shifts. But at the end of the day, our whole process is focused on finding the best quality companies that perform over the long term. We look at risk at the individual stock level and at the portfolio level, where we use our proprietary portfolio MATRIX to view the entire portfolio by sector and regional exposures, and stay very close to our positioning (always aware of our sector and regional positioning relative to the benchmark). At the individual stock level, we look for the strongest companies—strong balance sheets, strong returns, and greater earnings growth potential. When we evaluate stocks in our portfolio and new opportunities, we constantly incorporate negative externalities into our assessment and ensure there’s still an attractive risk/reward profile.
What is your current view on emerging markets, and where are you finding opportunities within emerging markets?
It was a good setup for international markets last year, and particularly for emerging markets, where a declining rate environment in the US, the US dollar weakening, and more political volatility led to a greater flow of capital towards international and emerging markets. We did add some positions to our portfolio from emerging markets, but we remain underweight. In general, we’re very selective about the emerging market stocks we own. While we will always focus on high-quality companies, in emerging markets, other factors must be considered, such as holding structure, liquidity considerations, or investor influence decisions. There could be a large family or government holding, so we must ensure that the governance of those companies is very strong, as with any company in our portfolio.
What is your outlook for China, given it recently reduced its growth forecast?
China is still growing faster than most developed markets. It is the second-largest economy globally, and there are fast-growing pockets, with potential for further economic stimulus and opportunities arising from massive investment in artificial intelligence and other technologies. The downturn in the property market has been a drag on the economy for many years, and it is no longer a major driver of growth. If we were to see some green shoots in the property market, that would certainly be another tailwind for consumer confidence and spending. We continue to be very selective in China, focusing on the top companies with growth opportunities.
What about India? Both India and China had previously benefited from discounted oil from Russia and Iran, but given current tensions and the spike in oil prices, does this put further pressure on valuations within India?
Any oil price shock puts pressure on Indian equities. They’re a large energy importer, particularly oil. For liquid petroleum gas (LPG), roughly 80 to 85% of their imported LPG, which is their cooking fuel, comes through the Strait of Hormuz, and there isn’t a lot of storage for LPG which could cause more near-term disruption. So the short answer is yes, sustained higher energy prices would have a significant impact on the Indian economy and market.
Could you evaluate volatility in individual holdings—such as Cameco—while maintaining conviction in the long-term investment thesis?
Cameco has been volatile in the near term, and while we’ve strategically taken some profits, we still hold a sizable position as we’re very optimistic about its future growth prospects. For many years, nuclear energy was out of favor—we’ve held the view that nuclear represents a great opportunity because it can meet the increasing demand for large amounts of clean energy. Recently, there has been a change in the view on nuclear energy. In particular, the US has changed its tune and is now more open to it. We’re going to need a lot of electricity—and clean electricity—to power the data centers that are being built. China alone is building 25-30 new nuclear reactors. Globally, 60-70 new reactors are planned. With its recent Westinghouse deal, Cameco has become more of a full-service nuclear provider, and there’s already a ramp-up in uranium enrichment through 2030. So, we think many strong structural trends should continue to support Cameco, despite near-term volatility in the stock price.
What other opportunities are you finding in the international markets?
Our process keeps our focus on the best-quality star companies, and then it’s up to us to determine whether it’s a timely opportunity. There are certainly some risks in the near term due to the oil price spike and its impact on many international markets and sectors, but in the long term, that’s still what we’re focused on. Bottom-up, fundamental stock picking is what drives our portfolio.
I mentioned Japan earlier. I think there are a lot of strong opportunities in Japan, despite near-term volatility due to elevated oil prices. We are optimistic about the new leadership of Sanae Takaichi, Japan’s first female prime minister. She has garnered a lot of support, and she wants to implement some more fiscal support, but I believe she’ll do so in a measured way. We’re also watching the Bank of Japan as it considers further rate increases. It’s been many years of very low or even negative interest rates. Just in the last year, they’ve started to increase rates very slowly, and they’ve learned the importance of telegraphing that policy to markets to avoid increasing volatility.
Now, the spike in oil prices will put some stress on equities, as Japan is such a large importer. If this is a prolonged conflict, we could see some increase in inflation, which would likely trigger the Bank of Japan to step in. So, although we have very strong confidence in the names we hold in Japan, there is certainly more external risk in the current environment. Again, it comes down to the individual companies we own and the opportunity set they have.