(Bloomberg) -- It’s time for investors to move away from the view that the US is the only game in town, according to Lisa Shalett, chief investment officer at Morgan Stanley Wealth Management.

The rally powered by artificial-intelligence stocks has helped send the valuation gap between non-US equities and the S&P 500 Index to a 20-year low, turning geographic diversification into an “inexpensive hedge” against a market correction, Shalett wrote in a report Monday. 

“Consider rebalancing extreme overweights to US equities with some exposure to Japan, Europe and EM, including Brazil, Mexico and India,” she said. “Structural drivers related to deglobalization of supply chains, constructive fiscal policies and stabilizing politics are growth catalysts, especially as rates ease” in some select developing nations.

Emerging-market stocks recently touched their weakest-ever level relative to the S&P 500 benchmark in figures going back to 1987, an analysis of Bloomberg compiled data show. Some investors have been favoring India as an alternative to China’s faltering economy, while Brazil and Mexico have already started to cut rates.

US stocks — which account for more than 63% of the MSCI ACWI Index of both developed and developing-nation shares — should see growth and rates at home converge with global peers amid a potential end to extraordinary US policy accommodation, the bank said. 

--With assistance from Srinivasan Sivabalan.

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