I think that in general it does, although I also believe you have to "pick your spots". International markets do not necessarily guarantee investment success, but they often can offer some welcome diversification and portfolio stability in uncertain times.
Frankly, I am currently thinking that the bearish sentiment on euro is so pervasive (there apparently are huge short euro positions in place amongst the hedge fund community) that international investments may in fact be attractive from a contrarian point of view.
This morning's New York Times carried an article about the subject - here's an excerpt:
A Farewell to Europe? Not So Fast
By PAUL J. LIM
IN 2008, during the worst of the financial crisis, portfolio diversification was of little help to stock investors as equity markets fell almost in lock step around the world.
Today, it’s a different story. For the first time since the global credit crisis, spreading one’s bets across different geographic regions is proving worthwhile. For example, while European equities have fallen around 5 percent so far this year — resulting from concerns over the ability of Greece, Portugal and other nations to manage their debt — domestic shares and Japanese stocks have gained more than 2 percent.
But what should investors make of this? Should they continue to diversify their portfolios — or simply reduce exposure to lackluster European equities?
It may be tempting to ditch European stocks. After all, Europe is expected to be one of the slowest-growing areas of the world in the next several years. (Its economy is expected to grow just 1 percent in 2010, compared with 3 percent for that of the United States.)
Moreover, stock markets in that region have become highly correlated with the Standard & Poor’s 500-stock index, thanks to the increasingly interconnected global economy. That means European stocks aren’t likely to zig when domestic stocks zag.
Nevertheless, many market strategists warn that jettisoning stocks from such a big chunk of the world, which represents more than a quarter of global stock market value, would be a big mistake.
For starters, doing so now would simply be locking in losses that have already occurred. “If you have extraordinary predictive capabilities and can see which regions will zig and which will zag, then yes, you don’t have to be fully diversified,” said Greg Schultz, a principal at Asset Allocation Advisors, a financial planning firm in Walnut Creek, Calif.
But without that ability to see into the future, it’s risky to make decisions by looking in the rear-view mirror, he said.
What’s more, as painful as it is to see some portion of your portfolio lose value, it’s actually a good sign when different asset classes move in opposite directions.