Using the attached screenshots answer the following questions:

1. What are the benefits of international stocks? How does the US economy affects the international markets.
2. What are the main types of risks that investors face when participating in international equity markets? How do these risks differ from domestic equity market risks?
3. Discuss the concept of political risk and its potential effects on international equity investments. Can you provide examples of political events that have influenced market volatility?
4. Explain how economic risk factors, such as inflation and interest rate fluctuations, can affect international equity investments. How do these factors interact with domestic economic conditions?
5. How might investors encounter difficulties related to liquidity when trading stocks in foreign markets?

Walt Czaickl, CFA | Senior Investment Strategist-quitles Jillian Geliebter, CAIA | Managing Director-Equities For several years, US stocks have outperformed equities overseas. But evolving conditions in global capital markets could change that. US investors who have avoided non-US stocks may want to take a fresh look at their allocations. Stocks have posted solid gains since they started to recover from last year's painful crash. The MSCI EAFE Index of developed-world stocks outside the US surged by 26.8% from October 2022 through the end of January 2023 in US-dollar terms, outperforming the S\&P 500's 14.3% gain. Four months doesn't necessarily signal a durable trend. However, since US stocks outperformed international stocks for eight (Dispiay. In several European countries and dapan and Canada, the ERP is currently substantially higherthan in the US and higherthan each country's long-temn average. Past performance does not guarantes future results. How can investors position themselves to capture this return potential? Don't be tempted to seek regional exposures that refiect global macroeconomic conditions, which are notoriously hard to predict. And the domicile of acconparry sni'tnecessarily areflection of its home-country's macreconomic cicumstances, European companes generate 58% of their revenue tran cutside the region (Dispigy above). Japanese and US companies also sell significant volumes to customers abroad. As a result, revenue ard earnings growth pozential will often be determined more by global industry cynamics than by irflation and GDP at home. So portfolics based on non-US companies should use fundamental research to evaluate the scurces of a company's revenue and the forces driving its business. of the past 10 years, many investors are rightly asking whether ret urn patterns may shift this year. Several cevelopments are challenging the US equity market's supremacy, In particular, a weaker US dollar and the global implications of China's reopening are supoorting equities cutside the US, while several central banks are farther along than the Fed in their monetary policy tightening phases. Market valuation dynarrics could add another impetus for international stocks. US Dollar Depreciation May Favor Non-US Stocks For most of 2022, the US dollar strengthened sharply against major currencies. The dollar's eppreciation was driven by the US Federal Reserve's aggressive irterest-rate hikes, aimed at curbing a spike in inflation. But since the end of September, the dol ar has weakened. While it's still too soon to declare that the dollar's downward trajectory will be s.sslained, the recent weakening is widely seen as a response to softer inflation readings, The market anticipates that a more meaningful decline in inflation will lead the Fed to ease its rate-hiking policy and, eventually, may lead it to begin taking rates down. That matters for internaticnal stocks. Our research shows that when the dollar was weaker over the last 20 years, non-US stocks tended to outperform US stocks Display. The weaker dollar creates beneficial effects for some countries and select stccks in global markets. And curency fluctuations will factor into retums for US investors who own international stocks, which are worth more after they're converted back to a relatively weak US dollar. China's Reopening Could Offset Recessionary Pressures Policy trends that drive currency moses and macroeconomic growth dif fer around the world. In China, for example, infla.icn remains relatively low, which should enable a.thorities to continue with stimulus policies that could help revive growth. The recent accelerated recoening fo lowing COVID lockdowns should help boost the economy and risk assets; this has helped Chinese stocks surge back to life in recent months. Similarly, emerging-market stocks may beneft from Chinese growth and improved conditions driven by the world's adjustment to higher inflation and interest rates. The release of pent-up demand in China could help support the gobal economy a a sensitive moment, China is the European Union's biggest trading partner. And China's biggast trac ing.partner is the 10-member Asscciation of Southeast Asian Nations ASSEADD, while four Asian countries that are not ASEAN nembers are among China's top 13 trading parthers. The recpening could ease supply chain pressures across the region. Asien economies could also benefit from a wave of Chinese tourism. While these trends may complicate efforts to bring global infletion cown, they would also help offset some of the recessionary pressures at play. Gauging Regional Return Potential Companies that may benefit from these trends can be found in different parts of the word. Equily investors will want to make sure that their valuations are altraclive, considering P/E multiples have expended from year-crd 2022 levels because of market gains early this year, In intemational developed markets and emerging markets, stocks have been relatively cheap ver sus US stocks for some time. But that generally didn't translate in to beller relurns during an era when US markels were driwen by a persistent domand for mega-cap, high-growth slocks, with low inflation and interest rates a material tailwind for many of those years. Now, as the market environment ewolves, the landscape of potential opoortunty warrants a closer lock The carnings risk premium (ERP) is an important gauge at a time when interest rates are rapidly adjusting to the inflationary environment. This metris captures a market's earnings yield minus the 10-year regicral government bond yield to evaluate the allractivi.y ol risk assels such as slocks wersus lower-risk assets such as guvernmenl bonds-a higher ERP indicates a more attractive potential investment opportunity. Our research suggests that the ERP looks especially attractive for non-US stocks