With investors focused on the impact of macroeconomic variables, geopolitical risk, and elections on their portfolios, it’s critical to consider where companies derive their revenues. According to new research from Morningstar Indexes, many national equity markets are not all that national. In fact, according to the global index provider’s most recent annual study on geographic sources of corporate revenue, just 60% of revenue for companies in the Morningstar US Market Index actually comes from the US. That’s down from 61% last year.
Morningstar Indexes 2024 Global Revenue Map (Domestic Revenue % for Equity Market Indexes)
Just one-third, or 16 of the 48 markets studied by Morningstar became more domestic in their revenue sources compared with last year, bucking the narrative that globalization is in decline. The study found that sector-level dynamics help explain market-level revenue trends. Technology companies tend to be more global in their revenue sources, while the financial services sector is generally more domestic. Though emerging markets, especially in Asia and Eastern Europe, are more domestic in their revenue sources, tech-heavy Taiwan and Korea stand out as exceptions. The rising share of technology stocks in the US has made the market more global.
The research also connects Morningstar research on correlations between global equity markets and revenues. Revenue sources help explain why correlations between developed markets have risen, while emerging markets tend to be less correlated with developed markets.
Dan Lefkovitz, Strategist, Morningstar Indexes:
“From the perspective of asset allocation, globalized revenue sources blur the lines between the home market and international portions of a portfolio. While it's true that global exposure can often come through domestic companies, it's also true that leading players in an investor's home market may be based offshore. As always, a global equity portfolio offers the broadest opportunity set.”
©2024 Morningstar. All Rights Reserved. The information, data, analyses and opinions contained herein (1) include the proprietary information of Morningstar, (2) may not be copied or redistributed, (3) do not constitute investment advice offered by Morningstar, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a security, and (5) are not warranted to be correct, complete or accurate. Morningstar has not given its consent to be deemed an "expert" under the federal Securities Act of 1933. Except as otherwise required by law, Morningstar is not responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use. References to specific securities or other investment options should not be considered an offer (as defined by the Securities and Exchange Act) to purchase or sell that specific investment. Past performance does not guarantee future results. Before making any investment decision, consider if the investment is suitable for you by referencing your own financial position, investment objectives, and risk profile. Always consult with your financial advisor before investing.
Indexes are unmanaged and not available for direct investment.
Morningstar indexes are created and maintained by Morningstar, Inc. Morningstar® is a registered trademark of Morningstar, Inc.