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A pedestrian walks past a stock indicator displaying numbers of the Tokyo Stock Exchange and the world’s major markets in Tokyo.

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(This story is part of the Weekend Brief edition of the Evening Brief newsletter. To sign up for CNBC’s Evening Brief, click here.)

U.S. equities have been the best place to invest during the past 10 years, but that dominance could shift in 2020.

Several investors and strategists are betting on international stocks outperforming the U.S. in the new year, something that has only happened twice since 2010. U.S. stocks have blown their international counterparts out of the water in that time.

The S&P 500 is up more than 180% and the MSCI ACWI ex U.S. exchange-traded fund (ACWX) has gained just 18% since 2010. Emerging markets have fared even worse this decade against the S&P 500. The iShares MSCI Emerging Market Index is up just 4% since 2010.

However, market experts think international stocks are poised for a comeback in 2020 versus the U.S. due to attractive valuations and a potential trough in global economic growth as world central banks take up more stimulative measures.

“Having underperformed for more than ten years, non-US stocks are set to gain the upper hand over their US peers,” Peter Berezin, chief global strategist at BCA Research, said in a note. “A reacceleration in global growth, a weaker US dollar, and favorable valuations should all support non-US stocks next year.”

Valuation favors international

The S&P 500’s price-to-earnings ratio, a widely used valuation metric on Wall Street, currently sits above 20. That’s the average’s richest valuation since August 2018. That high valuation follows the S&P 500 hitting all-time highs despite a year-over-year earnings decline.

International stocks, however, are trading at a much lower valuation. Through Friday’s close, the ACWI fund’s price-to-earnings ratio rested around 14.7.

Callum Thomas, head of research at Topdown Charts, notes there is a “50% valuation gap” between U.S. and international stocks. “Yes global ex-US has its problems, but are they 50% discount problems? At a certain point if the valuation gap is wide enough it kind of starts to speak for itself,” he said in a note.

This wide valuation gap comes as global economic growth has slowed down while the U.S. economy keeps humming. Last week, the Commerce Department said U.S. GDP expanded by 2.1% in the third quarter.

Economies around the world, meanwhile, have been stuck in the mud as manufacturing activity falls and trade conditions tighten.

In Europe, manufacturing activity hit a seven-year low in October. It rebounded slightly in November but remained in contraction territory, data from IHS Markit showed.

On the trade front, the U.S.-China conflict continues as both sides try to sign a so-called phase one deal. President Donald Trump also said Monday the U.S. will restore tariffs on metal imports from Brazil and Argentina.

These factors, however, have led global central banks to ease monetary policy. The European Central Bank launched a new bond-buying program earlier this year. The People’s Bank of China lowered its short-term funding rate for the first time since 2015 last month, and the Bank of Japan has kept monetary policy easy throughout 2019.

Global economic rebound?

The trade tensions between China and the U.S. have eased slightly in recent months as both sides show they are willing to reach some sort of deal. These moves could spur a resurgence in global economic growth, which would “disproportionately benefit” international stocks relative to the U.S., BCA’s Berezin said.

“The sector composition of international stocks is more skewed towards cyclicals than defensives compared to US stocks,” Berezin said. “As a result, non-US stocks generally outperform their US peers when global growth accelerates.”

To be sure, global stocks may be pricing in these scenarios already.

Mike Wilson, chief U.S. equity strategy at Morgan Stanley, said the MSCI All-Country World Index — which measures the performance of global stocks including the U.S. — has already produced returns that are “meaningfully higher” since hitting its December 2018 lows.

“That is consistent with a bottoming in global economic growth, meaning that markets are sending a signal about the turn in growth and pricing it in many cases,” Wilson said.

What to buy overseas

Wilson recommends investors buy into Japanese and Korean stocks in 2020. He also has an underweight rating on U.S. stocks heading into next year.

The iShares MSCI Japan ETF (EWJ) is up more than 18% this year, on pace for its biggest annual gain since 2017. The ETF rose 22.7% that year. Japan’s Nikkei 225 index is also up 16.4% for 2019.

Korean stocks, however, have not fared nearly as well this year. The iShares MSCI South Korea ETF (EWY) is down more than 2% for 2019, and the main stock index, the Kospi, is barely up year to date.

Europe is another international market eyed by experts heading into 2020. Stocks in the continent are on pace for their biggest annual gain since 2009, when they surged 28%. The Stoxx 600 index, which tracks a broad number of European stocks, is up 19.3% in 2019.

Cameron Brandt, director of research at EPFR, said money flows into European assets are “certainly indicating that all the bad news in Europe has been priced in.”

“Given that the ECB is back in full backstop mode, and that Europe has a lot of dry powder in terms of fiscal stimulus … it’s probably fair to say the greatest potential for upside next year may be in Europe,” Brandt said.

Within Europe, one market that could see further upside in 2020 is Germany, said Nuveen’s Brian Nick. The German Dax has rallied more than 20% in 2019 and is headed for its biggest one-year gain since 2013.

“If we get a stabilization in growth in 2020, the internationally oriented countries should do a bit better, especially if China looks a little more solid as it seems to,” the firm’s chief investment strategist said. “Those two economies are more closely tied together than the U.S. is to either of those.”

Buy international for the new decade?

Investors could also benefit from making a long-term bet on international stocks after the 2010s were dominated by the U.S.

John Davi, chief investment officer at Astoria Portfolio Advisors, thinks overseas equities can outperform over the new decade after lagging the U.S. for so long.

“In the last 10 years you’ve had this incredible run of the U.S. over the rest of the world. I think that’s going to shift over the next 10 years,” he said. “At the end of 2020, I think we’re going to have a much different decade-long return for U.S. versus international.”

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34 US troops had brain injuries from Iran’s strike, Pentagon says



A picture taken on January 13, 2020 during a press tour organised by the US-led coalition fighting the remnants of the Islamic State group, shows a view of the damage at Ain al-Asad military airbase housing US and other foreign troops in the western Iraqi province of Anbar.

Ayman Henna | AFP | Getty Images

The Pentagon said Friday that 34 U.S. troops were diagnosed with traumatic brain injuries suffered in this month’s Iranian missile strike on an Iraqi air base, and that half of the troops have returned to their military duties.

Seventeen of the 34 are still under medical observation, according to Jonathan Hoffman, the chief Pentagon spokesman.

President Donald Trump had initially said he was told that no troops had been injured in the Jan. 8 strike. The military said symptoms were not immediately reported after the strike and in some cases became known days later.

After the first reports that some soldiers had been hurt, Trump referred to them as “headaches” and said the cases were not as serious as injuries involving the loss of limbs.

Hoffman’s disclosure that 34 had been diagnosed with traumatic brain injury, or TBI, was the first update on the number injured in Iran’s missile attack on Ain al-Asad air base in western Iraq since the Pentagon said on Jan. 17 that 11 service members had been flown out of Iraq with concussion-like symptoms.

Hoffman said that of the 34 with TBI, 18 were evacuated from Iraq to U.S. medical facilities in Germany and Kuwait, and 16 stayed in Iraq. Seventeen of the 18 evacuees were sent to Germany, and nine remain there; the other eight have been transported to the United States for continued observation or treatment.

The one American sent to Kuwait has since returned to duty. All 16 of those who were diagnosed with TBI and remained in Iraq have since returned to duty, Hoffman said.

No one was killed in the attack on Ain al-Asad. The strike was launched in retaliation for a U.S. drone missile strike that killed Qassem Soleimani, the most powerful military general in Iran, on Jan. 3 at Baghdad International Airport.

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CDC confirms second US case of coronavirus. Chicago resident diagnosed



U.S. health officials said Friday they diagnosed a second patient with the China coronavirus — a Chicago woman who returned from Wuhan with the infection, and they are monitoring dozens of other potential cases here.

There are 63 cases being monitored in the U.S. that stretch across 22 states, including the first patient in Washington state and the new case in Illinois, said Dr. Nancy Messonnier, director of the National Center for Immunization and Respiratory Diseases.

Officials said the new patient, a woman in her 60s, is doing well and is in stable condition. She remains isolated in a hospital as a precaution, U.S. health officials said on a conference call with reporters. The Illinois patient traveled to China in late December and began experiencing symptoms when she returned to the U.S. last week, officials said. She did not have symptoms while flying, they said.

“She was not symptomatic when flying. And based on what we know now about this virus, our concern for transmission before symptoms develop is low, so that is reassuring,” Dr. Allison Arwady, Chicago’s public health commissioner, said on the call.

Upon returning to the U.S., the patient had very limited movement from outside her home and did not use public transportation or attend any large gatherings, they said. The patient began to feel unwell a few days after completing her trip and alerted her doctor.

“CDC believes the immediate risk to the U.S. public is low at this time, but the situation continues to evolve rapidly,” Messonnier said, adding that there is likely to be more cases in coming days. “We have our best people working on this problem.”

The flu-like coronavirus, first identified on Dec. 31, has killed at least 26 people in China and infected more than 900 worldwide.

On Tuesday, the U.S. Centers for Disease Control and Prevention confirmed the country’s first case — a Washington state man who has been quarantined in a hospital outside of Seattle after flying back from Wuhan, where the outbreak was first reported. The CDC said the man reached out to local health authorities last week once he started experiencing pneumonia-like symptoms.

U.S. health officials warned on Friday that the flu or other respiratory illnesses could complicate identifying more cases. They recommend that people call a health-care provider before seeking treatment so the appropriate measures can be put in place. The CDC is trying to speed up testing and to get the tests in the hands of state health officials. It currently takes the CDC about four to six hours to make a diagnosis once a sample makes it to its lab.

“We’re really working to understand the full spectrum of the illness with this coronavirus,” Messonnier said. “The problem with this time of year is it’s cold and flu season and there are lots of cold and respiratory infections circulating.”

On Thursday, the World Health Organization declined to formally designate the new virus as a global health emergency, after postponing its decision the day before. Health officials are trying to contain the fast-spreading illness without unnecessarily spooking global trade. WHO physicians said they needed more data before declaring a global emergency, but the virus is now spreading through close human contact and in health-care settings, they said.

Coronaviruses are a large family of viruses that usually infect animals but can sometimes evolve and spread to humans. Symptoms in humans include fever, coughing and shortness of breath, which can progress to pneumonia.

U.S. officials began screening passengers flying from China at major international airports over the weekend. Health officials said Friday that they have screened more than 2,000 people across 200 flights and have not found any cases.

In China, some 33 million people are now under travel restrictions. Shanghai Disney is closing until further notice at a time when theme park would normally be packed with tourists during Saturday’s Lunar New Year holiday.

Physicians have compared the outbreak to the 2003 outbreak of SARS, which had a short incubation period of two to seven days. U.S. officials said Friday that symptoms from the new virus, temporarily named 2019-nCoV, may take up to 14 days to appear. Neither U.S. patient had symptoms while they were flying, U.S. health officials said.

Former FDA Commissioner told CNBC on Friday the fast-spreading coronavirus outbreak is likely more contagious but less severe than the SARS epidemic, which rattled markets and slowed global economic growth.

“We probably will have some isolated outbreaks [of coronavirus in the U.S.], but that doesn’t mean it’ll translate to an epidemic,” Gottlieb told “Squawk Box.”

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China’s Hubei province confirms 15 more deaths due to coronavirus



A militia member checks the body temperature of a driver on a vehicle at an expressway toll gate in Wuhan in central China’s Hubei province Thursday, Jan. 23, 2020, in a bid to contain the spread of the new coronavirus.

Barcroft Media | Getty Images

China reported 15 more deaths and 180 new cases of coronavirus, according to a statement from the health department of Hubei province, as the outbreak escalates.

The outbreak that began in Wuhan, capital of Hubei province, has prompted China to ramp up measures to contain the virus including suspending public transport in 10 cities, shutting temples over the Lunar New Year and closing part of the Great Wall.

The newly identified coronavirus has created alarm because there are still many unknowns surrounding it such as how dangerous it is and how easily it spreads between people. It can cause pneumonia, which has been deadly in some cases.

China closed Shanghai Disneyland and part of the Great Wall and suspended public transportation in 10 cities as it rushed to contain the virus, stranding millions of people at the start of the country’s Lunar New Year holiday.

France reported three cases on Friday evening, the first ones discovered in Europe. More were likely, Health Minister Agnes Buzyn said.

Wuhan, a city of 11 million where the virus was first identified, is in virtual lockdown. Nearly all flights at Wuhan’s airport have been canceled and checkpoints block the main roads leading out of town. 

As the city slides into isolation, pharmacies have begun to run out of supplies and hospitals have been flooded with nervous residents. The city is rushing to build a 1,000-bed hospital by Monday, state media said.

Despite the lockdown, the virus is already spreading further afield.

The vast majority of the cases and all of the deaths have been in China, but it has also been detected in Thailand, Vietnam, Singapore, Japan, South Korea, Taiwan, Nepal and the United States. There is no vaccine or specific treatment for the new virus.

The U.S. Centers for Disease Control and Prevention said on Friday it had 63 patients under investigation, with two confirmed cases, both in people who had traveled to Wuhan.

Following a congressional briefing by health officials, Republican U.S. Senator John Barrasso, a former physician, said people in the United States with the virus may have been infected up to 14 days ago in China.

“We want to try to stop and prevent people from coming to the United States if they have it,” Barrasso told reporters, without providing details of how that might be accomplished.

Airports around the world have stepped up screening of passengers from China.

The newly identified coronavirus has created alarm because there are still many unknowns surrounding it such as how dangerous it is and how easily it spreads between people.

It can cause pneumonia, which has been deadly in some cases. 

Symptoms include fever, difficulty breathing and coughing. Most of the fatalities have been in elderly patients, many with pre-existing medical conditions, the World Health Organization said.

As of Thursday, China’s National Health Commission said there were 830 confirmed cases and 26 deaths.

‘Sense of urgency’

Most cases have been in Wuhan, where the virus is believed to have originated in a market that traded illegally in wildlife.

As China scrambles to contain the outbreak, it has suspended transportation in 10 cities in the central province of Hubei, where Wuhan is located, the Hubei Daily reported.

The country will take further, more targeted measures, state television reported, citing a State Council meeting on Friday. It did not give further details.

“Local authorities should take more responsibility and have a stronger sense of urgency,” state broadcaster CCTV said.

Week-long celebrations to welcome the Year of the Rat began on Friday, raising fears that the infection rate could accelerate as hundreds of millions of people travel to see family at home and abroad.

In Wuhan, a handful of people got off a high-speed train that pulled into the city’s station on Friday but nobody boarded.

“What choice do I have? It’s Chinese New Year. We have to see our family,” said a man getting off the train who gave his family name Hu.

As part of the restrictions, some sections of the Great Wall near Beijing will be closed from Saturday, state media said.

Beijing’s Lama Temple, where people traditionally make offerings for the new year, has closed, as have some other temples and the Forbidden City, the capital’s most famous tourist attraction.

Shanghai Disneyland will close starting on Saturday. The theme park has a 100,000 daily capacity and sold out during last year’s new year holiday.

Film premieres have been postponed and McDonald’s suspended business in five cities in Hubei province.

“There’s so much news, so much data, every 10 minutes there’s an update, it’s frightening, especially for people like us in a severely hit area,” Lily Jin, 30, a resident of Wuhan, told Reuters by phone.

Vaccine quest

The WHO said on Thursday it was a “bit too early” to designate the outbreak a public health emergency of international concern, which would require countries to step up their response.

That decision could well be reassessed in coming days as the situation evolves, said Anthony Fauci, the U.S. National Institutes of Health’s top infectious disease official, adding that it was “open to question” whether shutting down travel would have a major effect.

“The mass involuntary quarantine in Wuhan and its neighboring cities is counterproductive,” added Lawrence Gostin, a public health expert at Georgetown University Law School in Washington. “A lockdown of Wuhan will drive the epidemic underground, provoking fear and panic.”

Some experts believe the virus is not as dangerous as the one that caused the 2002-03 outbreak of Severe Acute Respiratory Syndrome (SARS), which also began in China and killed nearly 800 people, or the one that caused Middle East Respiratory Syndrome (MERS), which has killed more than 700 people since 2012.

Three international research teams – using different approaches – have begun work on vaccines, the Coalition for Epidemic Preparedness Innovations said.

Markets have been roiled this week on fears that the outbreak will curb travel and hurt economic demand. Shares in luxury goods companies have been particularly hard hit on fears of a drop in demand from China.

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