Int value equities make comeback after decade in shadows

Binaya Dahal

Editorial Intern, Financial Newswire

21 January 2026

International value equities are surging after a decade in the shadows with rebounding premiums and broad 2025 stock gains signalling a structural shift in market leadership, ClearBridge Investments portfolio manager Grace Su says.

Su said although last year’s gains were driven by short-term sentiments, the shift had been developing since the Global Financial Crisis (GFC).

“In our view, this reflects more than a short-term rotation; it points to a market environment that is increasingly supportive of valuation discipline at a time of elevated dispersion across regions, sectors and individual companies,” she said.

Su added that international markets remain deeply discounted relative to the US, with price-to-book gaps exceeding 50%, the widest since the dot-com era.

At the same time, value stocks within these markets trade at unusually large discounts to growth, creating what Su calls a “double discount” opportunity.

“Many of the structural headwinds that weighed on international markets in the post-GFC period, like weak balance sheets, unresolved banking issues and constrained fiscal policy, have eased,” she said.

“Banking systems are healthier, corporate balance sheets are stronger, and policymakers have become more willing to deploy fiscal support, as evidenced by large, multiyear investment programs in Europe and Japan.”

Su said international value also provides diversification benefits, especially for portfolios heavily concentrated in US growth.

“In a world where economic cycles may become less synchronised and market leadership more fragmented, this combination of regional exposure and factor diversification creates a favourable setting for active, bottom-up value investing, one that complements US-centric allocations rather than competing with them,” she said.

Looking ahead, Su said the global backdrop is more stable with moderating inflation and fiscal programs from US infrastructure to Chinese targeted stimulus supporting growth.

She added that investment leadership is broadening beyond mega-cap AI, with logistics, efficiency improvements and power infrastructure emerging as key drivers.

Su also expects additional tailwinds from global mergers and acquisitions where deregulation, strategic repositioning and potential lower interest rates may spark activity.

“In today’s market, we are finding opportunities not through broad macro positioning, but by leaning into specific sectors and businesses where balance sheets are stronger, earnings power is normalising and valuation still offers a margin of safety.”

Financials, which now make up nearly 40% of international value benchmarks, remain central to ClearBridge’s strategy, according to Su.

“While valuations are no longer at extreme lows, in our view, they remain attractive given a combination of outsize earnings growth and double-digit shareholder yields,” she said.

“We believe exposure to financials is regionally diversified but supported by broadly consistent trends.”