By Paul R. La Monica

So much for the dominance of top American stocks. Maybe investors should be talking about international "exceptionalism."

Investors have begun to shift away from U.S. assets because of the government's unpredictable tariffs regime and the looming threat of stagflation. More strategists are predicting the end of U.S. superiority in financial markets, known as "American exceptionalism," as the dollar has weakened alongside a tumble in stocks and long-term bond yields since President Donald Trump's inauguration.

The Bancreek International Large Cap exchange-traded fund is up more than 15% so far this year. By way of comparison, Bancreek's U.S.-focused large cap ETF, is down slightly this year, and the S&P 500 has tumbled nearly 4%.

It seems time for other global markets -- including the U.S.'s northern neighbor -- to shine.

"There are a lot of neat companies in Canada and the Canadian market gets ignored a bit," said Bancreek Capital Advisors CEO Andrew Skatoff, in an interview with Barron's. Skatoff noted that six of the International Large Cap ETF's 30 holdings are based in Canada.

Among them are Toronto-based Constellation Software and Canadian discount retailer Dollarama. Shares of Constellation Software are up nearly 15% this year while Dollarama has surged 20%.

The big weighting in Canadian stocks isn't the result of an affinity for maple syrup and ice hockey, though. Skatoff said the fund is willing to scour the globe to find top stocks.

"We're looking for companies with durability that can keep growing and have reasonable valuations," he said.

The CEO added that the notable pullback in the dollar this year is also giving a lift to companies in international markets benefiting from stronger currencies.

"If you think the dollar is going to weaken further, this is another tailwind for international stocks," Skatoff said.

And it certainly doesn't hurt that U.S. stocks, even after their pullback so far this year, remain more expensive than many of their international counterparts.

The S&P 500 is trading at 21.5 times earnings estimates for this year. Meanwhile. the U.K.'s FTSE 100 and the Stoxx Europe 600 indexes trade at 13 and 15 times 2025 earnings estimates respectively. Japan's Nikkei 225 has a forward price-to-earnings ratio of 17.

Skatoff said that the fund looks to invest in large multinational companies. To that end, the fund has investments in European defense giant BAE Systems, database companies RELX and Wolters Kluwer as well as Deutsche Telekom, which owns a majority stake in T-Mobile US.

It also owns shares of Lotus Bakeries, a Belgian firm that is well-known to many U.S. consumers for its Biscoff brand of cookies, a popular staple on Delta Air Lines flights.

But Skatoff said investors also shouldn't overlook lesser-known international companies that stick mainly to their home markets, which should help insulate them from tariffs and any further trade war tension.

The fund also owns two European telecoms with a more domestic focus, Germany's Freenet as well as Swisscom.

"National telecoms are interesting because they tend to be stable companies with reasonable growth and pricing power," Skatoff said.

The fund also owns stakes in BayCurrent, a Tokyo-based consulting firm that Skatoff said was similar to Accenture but has most of its customers in Japan, and JB Hi-Fi, an Australian consumer electronics retailer.

"It's not like international companies are not growing. You just have to find them," Skatoff said.

So it looks like American investors may need to bust out their passports and do some globe-trotting. Some of the best values in the market may lie in Europe and Asia, as well as up north.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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May 09, 2025 13:07 ET (17:07 GMT)

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