I ditched large cap international because of the example of the Japanese stock market, where from 1990 - 2019 the Japanese market as a whole stagnated but Japanese small cap value stocks delivered between 5.4% and 8% annualized depending on whose index you're using.
https://www.pwlcapital.com/wp-content/uploads/2020/12/Five-F... (Page 19)
Given population demographics, I see most of Europe and developed Asia going the way of Japan and am betting their equity markets will show similar characteristics. Never mind that even during good times there has been a historical small-cap value premium in most of those regions, although not as pronounced as in the US.
Ditching emerging markets is part practical part political. The practical aspect is most emerging market funds have a sizeable allocation to Chinese stocks. Chinese stocks have failed to produce reliable returns and are incredibly distorted by the Chinese government picking winners and losers, sometimes at gunpoint. I don't want to bet my financial future on how Xi feels about his breakfast on any given morning. Additionally, China is a geopolitical adversary. Yes it's impossible to completely cut them out of one's supply chain, but I can avoid directly boosting their financial markets.
As for the few emerging markets funds that don't include China, they include other nations such as Saudi Arabia that I'm hesitant to actively invest in for political reasons. I also think emerging markets in general are going to get screwed for the next few decades as globalization declines, climate change becomes more impactful, and the world generally becomes more dangerous and chaotic. There may be money to be made in EM, but I doubt it will be consistent or as simple as investing in an EM index fund.
Given population demographics, I see most of Europe and developed Asia going the way of Japan and am betting their equity markets will show similar characteristics. Never mind that even during good times there has been a historical small-cap value premium in most of those regions, although not as pronounced as in the US.
Ditching emerging markets is part practical part political. The practical aspect is most emerging market funds have a sizeable allocation to Chinese stocks. Chinese stocks have failed to produce reliable returns and are incredibly distorted by the Chinese government picking winners and losers, sometimes at gunpoint. I don't want to bet my financial future on how Xi feels about his breakfast on any given morning. Additionally, China is a geopolitical adversary. Yes it's impossible to completely cut them out of one's supply chain, but I can avoid directly boosting their financial markets.
As for the few emerging markets funds that don't include China, they include other nations such as Saudi Arabia that I'm hesitant to actively invest in for political reasons. I also think emerging markets in general are going to get screwed for the next few decades as globalization declines, climate change becomes more impactful, and the world generally becomes more dangerous and chaotic. There may be money to be made in EM, but I doubt it will be consistent or as simple as investing in an EM index fund.