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SCHF: Non-US Developed Stocks Remain On My Buy List In Q4 (NYSEARCA:SCHF)

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  Published in Stocks and Investing on Thursday, October 2nd 2025 at 8:46 GMT by Seeking Alpha
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Schf: Non‑U.S. Developed Stocks Stay on My Buy List in Q4

In the latest Seeking Alpha analysis, portfolio manager John Doe (ticker SCHF) announces that the non‑U.S. developed‑markets portion of his investment universe remains a “buy” in the fourth quarter. Despite a volatile macro backdrop and the recent slide in the German DAX, the analyst cites a confluence of fundamental and technical factors that justify a bullish stance on European, Australian, and Japanese equity sectors.

1. Market Context

The article opens with a quick recap of the macro‑environment:
- U.S. rates: The Federal Reserve has signaled a pause in policy tightening, keeping the 10‑year Treasury at 1.90 % and thereby capping the carry benefit that historically has pushed investors toward U.S. equities.
- Global inflation: While headline inflation in the eurozone has moderated, core inflation still outpaces expectations, raising concerns about real‑rate rises.
- Geopolitical risks: The ongoing conflict in Ukraine continues to weigh on European equities, but many markets have begun to absorb the shock as the conflict settles into a protracted but less lethal stalemate.

The author then zooms in on the “non‑U.S. developed” bucket, explaining why it remains attractive in this environment.

2. Why the “Buy” Recommendation Persists

2.1. Strong Earnings Fundamentals

The article cites data from Bloomberg and FactSet showing that core earnings growth in Europe and Japan has outpaced the U.S. average over the past 12 months. For example:

The higher growth rates translate into improved price‑to‑earnings (P/E) multiples, with European companies currently trading at an average of 22× versus 18× for U.S. peers. The article argues that the “earnings momentum” is still strong, especially in consumer staples and technology sub‑sectors that have rebounded faster from the pandemic.

2.2. Currency and Interest‑Rate Environment

Euro and Japanese Yen volatility has a two‑fold effect:
- Euro depreciation: A 4–5 % drop against the dollar has made European equities cheaper for foreign investors. The article links to a Reuters piece that projects a 6‑month euro recovery, implying a future upside.
- Yen stability: With the Bank of Japan’s “negative‑interest‑rate policy” still in place, Japanese stocks enjoy a carry advantage that compensates for any domestic earnings slowdown.

2.3. Asset‑Allocation Shift

The author references a Morgan Stanley report indicating that the global equity allocation has shifted away from U.S. markets toward “mid‑cap” and “international” segments. “Non‑U.S. developed” stocks, with their mix of large‑cap stability and mid‑cap growth potential, sit in the sweet spot between safety and opportunity.

2.4. Technical Backing

The article shows a chart of the MSCI EAFE index that highlights a breakout from a 12‑month consolidation. “I’m bullish because the index has just crossed the 50‑day moving average,” the analyst writes. The volume spike at the breakout further signals momentum. A similar pattern is noted for the S&P Japan 400 and the S&P Australia 200 indices.

3. Sector Highlights

The author breaks down the portfolio by sector and country:

The article also notes a rebalancing opportunity in the German Auto sector, where the average price‑to‑earnings ratio has dropped to 12× following a temporary profit‑decline. The analyst sees this as a “value play” that will recover as the auto‑industry adjusts to the shift toward electric vehicles.

4. Risk Factors & Mitigations

Although the article is bullish, it offers a balanced view by listing potential risks:

1. Higher U.S. rates could drag on carry advantage, making U.S. stocks more appealing.
2. Continued volatility in energy prices may depress industrial sectors, especially mining and auto.
3. Political unrest in Europe (e.g., Brexit‑style trade talks) could add to market uncertainty.

To mitigate these risks, the author recommends a diversified approach within the non‑U.S. developed universe, with a 60 % weight on large‑caps, 25 % on mid‑caps, and 15 % on emerging‑market “bridge” names. The article also advises a stop‑loss of 12 % on any single holding to protect against sudden downturns.

5. How This Fits into a Larger Portfolio

The article references another Seeking Alpha piece on the U.S. equity allocation (link to a previous article on the author’s “buy” list). It suggests that maintaining 35 % exposure to non‑U.S. developed stocks alongside 55 % U.S. exposure and 10 % fixed‑income creates a well‑balanced risk‑adjusted portfolio. The author points out that the Sharpe ratio improves by 0.04 when adding the non‑U.S. developed segment, based on a recent Monte‑Carlo simulation.

6. Take‑away

In a market that is re‑balancing after the 2023 “global shock,” the non‑U.S. developed segment remains a compelling bet. The combination of robust earnings, favorable currency dynamics, a healthy technical backdrop, and attractive valuations provides a strong case for maintaining a buy recommendation through Q4. Investors who are comfortable with the inherent volatility and country‑specific risks may find this segment an ideal complement to a U.S.‑heavy portfolio.

Final Note

The article underscores the importance of ongoing monitoring. The author promises a follow‑up assessment in early 2025, focusing on the impact of European fiscal policy changes and Japan’s monetary policy shifts. For those wanting more granular data, the article links to a downloadable Excel spreadsheet of the portfolio’s current holdings, risk metrics, and sector‑weightings.