Four years ago, we had a Forum topic
on the global revenue exposure of various portfolio mixes of U.S. and international stocks. Since then I've received several requests via PM to update the old data. Revenue data for global stock indexes is hard to find, incomplete and often proprietary — but what's openly available can still be useful to the do-it-yourself investor, in my view.
What is revenue exposure?
It's simply a breakdown of where around the world companies in a cap-weighted stock index sell their goods and services. For example, a 100% U.S. stock portfolio (at left, chart below) makes 70% of its sales domestically and 30% overseas in various world regions. As the international stock allocation increases, the percentage of overseas revenue exposure in the portfolio also naturally increases. With a 25% portfolio allocation to international stocks (middle chart), foreign revenue exposure is about 50% — and rises to over 70% with a 50% U.S./50% international allocation (the world cap-weighted portfolio, at right).
The table below has a finer breakdown of the data for various mixes of U.S. and international cap-weighted stock indexes:
How is this helpful for portfolio allocation?
Sources: U.S. data from FactSet; International data from MSCI, for 2017.
If, for example, an investor wanted to target the revenue exposure of her stock portfolio one-third each to the U.S. economy, to foreign developed countries and to emerging markets, then a 60% U.S./40% international cap-weighted stock mix would be about right today. This allocation is my personal choice — and I've been reluctant to adopt a world cap-weighted stock portfolio (at right above) because it has just a 28% revenue exposure to the U.S. economy.
Hope Forum members will find this updated information useful — or at least of interest. Any thoughts?