Why international stocks are starting to look more attractive than US equities

As investors scan the global landscape for income and value, a new note from JPMorgan suggests it might be time to look beyond US borders.

The bank’s latest equity strategy research highlights a growing divergence in shareholder yields across regions, a shift that could reshape how investors think about returns.

Its analysts point out that while US markets have long led in shareholder payouts thanks to aggressive stock buybacks, that edge is narrowing.

Over the past 12 months, the US buyback yield has slipped to 1.8%, while Europe isn’t far behind at 1.4%. Historically, that gap was wider, giving the US a distinct advantage. Now, Europe is catching up.

But it’s in dividends where international markets pull ahead. European stocks are yielding 3.1%, more than double the US yield of 1.3%. Japan and emerging markets also offer more attractive dividend yields than the US, although they trail Europe.

Combine dividends and buybacks, subtract bond yields (essentially the "risk-free rate"), and you get what JPMorgan calls the total shareholder yield over the risk-free rate.

On this measure, Europe comes out ahead with a positive yield of 1.6%. The US, by contrast, now shows a negative yield of -1.1%, a clear signal, JPMorgan says, that the US market may be less rewarding for shareholders in the current environment.

The picture is also evolving in Japan. Share buybacks there are hitting new highs, not just in traditional sectors like autos and financials, but across a broader swathe of the market, thanks to ongoing corporate reforms aimed at boosting capital efficiency.

Emerging markets, which JPM's recently upgraded to overweight, are also seeing gains. With valuations still reasonable at around 12 times earnings, and shareholder returns improving, EM is becoming harder to ignore.

Of course, the US bank cautions that global equities are still interconnected. If US markets come under pressure this summer, especially if inflation proves sticky and bond yields rise, other markets won’t be immune.

But unlike in the past, international stocks don’t need to behave like a high-beta version of the US. They can offer diversification and, crucially, better income for investors seeking shelter from volatility.