“The International Monetary Fund’s global economic growth forecast has grown more optimistic, with the world economy now expected to expand 3.3 percent in 2026, up from an earlier prediction of 3.1 percent in October. The revision is based largely on a surge in AI-related investment,” reports The Doomslayer.
The New York Times says:
The world economy is projected to grow faster this year than previously expected…as surging investment in artificial intelligence and other technology is poised to offset the headwinds of rising protectionism.
In its latest World Economic Outlook, the I.M.F. forecast that global output will hold at 3.3 percent for a third consecutive year. The estimate is 0.2 percentage points higher than the fund’s prediction in October, but growth is expected to slow to 3.2 percent in 2027. Global inflation is expected to ease this year to 3.8 percent, from 4.1 percent in 2025.
Foreign stock markets performed much more poorly than the U.S. stock market over the last decade. But over the last year, most foreign stock markets performed better than the U.S. stock market, rising faster. The average foreign stock is still cheaper than the average U.S. stock, trading at a much lower price-to-earnings ratio. But the difference has shrunk in the last year, so foreign stocks are not as cheap as they once were.
If you had invested in the stock market in South Korea a year ago — like buying shares in a diversified mutual fund that owns a variety of Korean stocks — you would have more than doubled your money, with the average stock rising more than 130%. The Canadian and Mexican stock markets rose over 30%. Even countries with deep-seated economic problems saw big increases in their stock market. Pakistan’s stock market is up 65% over what it was a year ago.
Because foreign stock markets are not as cheap as they were a year ago, it is unclear whether you are better off now buying shares in overseas stock markets (by buying shares of a mutual fund that invests in foreign countries, like Vanguard Total International Stock Index Fund) than buying shares in the U.S. stock market (or buying shares in mutual funds that invest in U.S. stocks, such as Vanguard Total Stock Market Index Fund).
While foreign stocks are cheaper in the sense of trading at a lower ratio of price to earnings, they may also have greater offsetting risks associated with them — some countries are very dependent on sales of a particular commodity, or a very vulnerable to trade wars or higher energy prices (because they import most of their oil or natural gas), unlike the U.S., which produces most of the energy it uses.
