By: Kathryn Rooney Vera, Managing Director and Chief Market Strategist
The gap between U.S. equity valuations and international markets is becoming a more important indicator for investors. U.S. stocks are still priced for resilient earnings growth even as oil and food shocks begin to raise the risk of margin pressure and weaker consumer spending. That contrast matters because investors can still access global supply chain and technology exposure in overseas markets without paying the same premium embedded in the S&P 500. The result is a growing cross-market tension in which valuation discipline is starting to matter more than simple U.S. market leadership.
Kathryn Rooney Vera, StoneX Group Chief Market Strategist, has spent years assessing how inflation, rate expectations, and cross-asset positioning reshape global capital allocation. Her perspective is especially relevant in this environment because she connects Federal Reserve constraints and inflation persistence to the widening valuation gap between U.S. and international equities.
U.S. equity valuations are increasingly exposed because current multiples still assume earnings resilience despite rising inflation risk. Rooney Vera states that "the S&P 500 is about 6,600 mid-March" and "that's trading at a forward PE at 21 times", which she compares with a 12.4 times median valuation at the onset of earlier oil shocks. That premium matters because U.S. equities are being priced as though margins and demand can absorb higher food and energy costs without meaningful damage. Consequently, even a modest downgrade to earnings expectations could create a sharper valuation adjustment in the U.S. than in cheaper overseas markets.
International equity markets are becoming more compelling because investors can still access global growth themes without paying U.S. style valuation premiums. Rooney Vera argues that "in certain international markets we're seeing single digit to low 18 multiples", even where those markets retain exposure to technology investment and global supply chains. That lower entry point improves risk reward because the same macro backdrop does not carry the same earnings perfection already priced into U.S. stocks. As a result, international markets look better positioned to absorb volatility while still participating in broader growth and capex trends.
U.S. earnings expectations now look vulnerable in a way that strengthens the relative case for international allocation. Rooney Vera notes that Wall Street is still targeting "314 per share" in earnings, but warns that the market could instead see "295 300 per share" once food inflation and elevated oil prices begin to pressure spending and margins. That downgrade risk is especially important because a high multiple market becomes expensive very quickly when estimate cuts begin to arrive. In contrast, international equities do not require the same degree of earnings perfection, which makes global rotation a more defensible strategy as inflation persistence reshapes equity leadership.
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--- Expert: Kathryn Rooney Vera, Chief Market Strategist, StoneX
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