This podcast is being brought to you by John Hancock Investment Management Distributors LLC, member FINRA, SIPC. The views and opinions expressed in this podcast are those of the speakers, are subject to change as market and other conditions warrant, and do not constitute investment advice or a recommendation regarding any specific product or security. There is no guarantee that any investment strategy discussed will be successful or achieve any particular level of results. Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks, including the potential loss of principal.

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John Bryson:

Hello and welcome to the Portfolio Intelligence Podcast. I'm your host, John Bryson, head of investment consulting and education savings at Manulife John Hancock Investments. Today is February 25th, 2026. Over the last year, international markets have reentered the conversation after a long stretch where U.S. equities dominated headlines and portfolios. We saw renewed momentum overseas, driven by easing inflation, improving earnings trends, and more attractive valuations across developed and select emerging markets.

John Bryson:

And as we move through 2026, the trend continues. The question for investors today isn’t whether U.S. markets still matter — they absolutely do — but whether the opportunity has broadened and how global exposure fits into portfolios going forward. To help unpack that opportunity, I’m thrilled to have Dean Bumbaca of Axiom Investors join us today. Dean is an international growth fund manager on a number of our products, and he brings a global perspective on markets, valuations, and risks.

John Bryson:

So we're going to talk today about the opportunities in international equities. Hey Dean, welcome to the podcast.

Dean Bumbaca:

Thank you very much, John.

John Bryson:

You got it. Hey, listen, I want to start by understanding a little bit more about how you think about investing at Axiom.

Dean Bumbaca:

At Axiom, we view positive surprise as the most durable factor that drives alpha in equity markets. Our entire process is designed to spot inflections in businesses that ultimately result in positive earnings surprise. Before that earnings surprise becomes evident, operational catalysts tend to emerge — a new product launch, entry into a new market, a strategy pivot, or a technological trend that favors a company.

We seek out companies undergoing those positive inflections.

But positive surprise is not enough. Competitive advantage must be improving. Wide moats are not enough — they need to be expanding, whether through manufacturing advantages or increasing power over suppliers or customers.

Avoiding behavioral pitfalls is also crucial. Firms that consistently perform well over decades tend to have processes that minimize biases, whereas underperformers often fall victim to them — especially confirmation bias.

Our process is designed to avoid those pitfalls. We reject “buy and hold” and instead embrace “buy and monitor.” We think of investments as hypotheses that new information can prove or disprove. We aim to invest like scientists, not promoters.

John Bryson:

Nice. I really like the part about surprises, catalysts, removing emotional biases, and being more systematic. Now let’s stay high level — what’s your case for international equities, especially growth, in 2026?

Dean Bumbaca:

U.S. market outperformance up until year-end 2024 was driven by the strengths of the U.S. economy and entrepreneurship, especially in designing the internet, search, social media, and application software.

But we believe we are in the early innings of the baton passing from the design era to the build era — an era where outsized growth comes from capital-heavy enterprises.

America has shifted away from manufacturing over generations. The winners of this new phase are in Taiwan, Japan, Korea, and parts of Europe — regions strong in advanced manufacturing, grid equipment, aerospace, and semiconductors.

Positioning remains lopsided. Global investors are crowded into U.S. assets. Most allocators are overweight U.S. and underweight international markets. Meanwhile, the U.S. maintains a $24 trillion net investment deficit, driven by its equity outperformance and lack of global rebalancing.

We are likely entering a rebalancing phase where large institutions reassess their U.S. exposure. A weakening U.S. dollar could accelerate the shift. Individual investors have the ability to move more quickly than slow-moving institutions.

John Bryson:

Great points. We see a lot of home-country bias. Many investors are underweight international, and we're not necessarily arguing for an overweight — just closing the gap because the opportunity is meaningful.

I want to ask about valuations. We're hitting new highs in the U.S. while international markets are outperforming. How do you feel about valuations globally, and can international outperformance continue?

Dean Bumbaca:

We don’t view valuations alone as a catalyst. You need durable earnings surprise or structural business model improvements. Many international index constituents are cheap — and cheap for a reason.

But years of underperformance have caused investors to overlook dynamic international companies trading at deep discounts to U.S. peers, despite often out-executing and gaining market share.

International markets aren’t a monolith. Countries differ in economic dynamism, political risk, and stages of technology and consumer adoption. We analyze these differences deeply to find companies riding innovation waves or benefiting from favorable policy.

When discovered, these companies can deliver both earnings upside and valuation rerating — something we are seeing in Korea and Japan as companies optimize balance sheets and capital practices.

There is more “juice to squeeze” in many international markets than in U.S. corporate structures.

John Bryson:

Before we get to specific opportunities, let’s talk about tech and AI. What are you watching to determine whether the AI trend continues?

Dean Bumbaca:

We focus on evidence, not opinion. We monitor whether scaling laws remain intact, whether capital remains abundant, whether token generation continues accelerating, and whether AI-native businesses are being created.

Each new model—Gemini, ChatGPT, Claude, Grok—has delivered significant performance gains, validating increased spending behind scaling laws. Capital is plentiful, with oversubscribed equity and debt raises backed by global investors from the Middle East to SoftBank.

Token generation remains on a steep adoption curve. We are also tracking AI-native companies — over 50 generating more than $100 million in recurring revenue — across legal tech, life sciences, coding assistants, and commerce.

These companies will be the earners and spenders of tomorrow.

John Bryson:

Let’s talk opportunities. What regions or sectors excite you that U.S. investors may overlook?

Dean Bumbaca:

We have a large and growing position in Japan. It is a highly advanced economy with strengths in materials science and scaled manufacturing. Many Japanese companies serve as chokepoints in fast-growing sectors such as semiconductor testing, optical connectors, gas turbines, and components for aerospace and nuclear industries.

Japan is also undergoing structural changes aimed at improving shareholder returns, ROE, and valuations. Only 10–15% of household wealth is in equities, and the government is encouraging growth in this area. Retirement equity investments grew significantly last year, with accounts up double digits.

We also see opportunity in aerospace and defense, driven by rising global defense budgets and strong demand for travel and engine maintenance. European financials also present earnings upside through credible cost-reduction initiatives and capital-return programs.

John Bryson:

I haven’t had many podcasts talking about opportunities in Japan or European financials, but that’s why active managers matter — finding these ideas.

If you were to put a bow on this, what should investors keep in mind about international opportunities?

Dean Bumbaca:

As U.S.-based investors, we naturally have outsized U.S. exposure — our wages, homes, and portfolios. But consumers buy goods supported by global supply chains.

Most Americans are inherently currency-mismatched and disproportionately exposed to a weakening U.S. dollar.

Simply adding non-U.S. equities pushes investors further out on the efficient frontier, lowering portfolio variance due to low correlations between U.S. and international markets.

Decades of studies show home-country bias is costly. Allocating even a portion internationally captures dynamic opportunities.

John Bryson:

“Dynamic opportunities” is the perfect closing thought. Dean, thank you for joining us.

To our listeners, please subscribe to the Portfolio Intelligence Podcast or visit our website for more content on international investing, portfolio construction, and business-building ideas.

Thanks for listening.

John Bryson:

This podcast is being brought to you by John Hancock Investment Management Distributors, LLC member, Finra, CPC. The views and opinions expressed in this podcast are those of the speaker are subject to change as market and other conditions warrant and do not constitute investment advice or a recommendation regarding any specific product or security, there's no guarantee that any investment strategy discussed will be successful or achieve any particular level of results.

John Bryson:

Any economic or market performance information is historical and is not indicative of future results, and no forecasts are guaranteed. Investing involves risks including the potential loss of principal.

Alpha measure: the difference between an actively managed fund's return and that of its benchmark index. An alpha of three, for example, indicates the fund's performance was 3% better than that of the benchmark or expected return over a specified period of time.

Foreign investing, especially in emerging markets, has additional risks such as currency and market volatility, and political and social instability. Growth stocks may be more susceptible to earnings disappointments.