Stocks around the world have largely suffered in step with Wall Street this year, with only a few holdouts in countries that pump a lot of oil like Norway and Saudi Arabia. With correlations across national borders so tight, a lot of investors are wondering whether they should even bother looking overseas for shelter.

After all, the whole point of global investing revolves around diversification. You don’t want to concentrate your entire portfolio into a single economy on a single cycle, so a wider focus helped to expand the universe of choices available.

But when just about everything is moving in the same direction, an expanded universe doesn’t provide much of a tangible benefit. And while quite a few “emerging” markets are doing well, most are stuck in the same rut as the United States and other developed economies.

Chinese stocks are down 18% YTD in dollar terms. U.S. stocks are down 13%. India, Korea, France, Germany, Taiwan, Malaysia and on and on and on . . . all down. Russia? Forget about it.

Over the years I’ve found that trying to pick a country and rotate from strength to strength just doesn’t work well. The more mature a market gets, the closer it tends to trade in line with what’s happening on Wall Street, which means that if you can buy in, odds are good you aren’t really buying a lot of diversification potential.

Fringe markets remain largely unexplored and exciting by definition. Some years Egyptian stocks, for example, will be the isolated bright spots in a world full of losses. Or a particular Peruvian or Indonesian company will capture global investors’ attention and the rush of capital will lift the whole market.

In general, however, I focus on a much simpler binary strategy. When things look scary for everyone, money tends to crowd into Wall Street and we’re better off staying in stocks close to home. But when conditions start to improve, the United States loses a little of its dominant position as money starts circulating more widely around the planet.

That’s when you want to start investigating a little exposure to foreign markets. And that’s where the real diversification advantage of a global portfolio comes in . . . I’m talking about exchange rates and currency risk here.

Right now, the dollar is extremely strong, thanks to the Fed’s tough posture. Once again, USD is nudging around the highest levels in decades. The world appreciates our central bank’s efforts to fight inflation and protect our currency.

Some of them aren’t so lucky. I just saw that Turkey is reeling in the face of 73% annualized inflation. Every lira today now stretches about half as far as it did a year ago. And when Turks are trying to buy imported products, the pain gets even worse.

Many don’t want to deal with that. They want dollars, so they’re paying a premium to trade their lira away and grab money that’s eroding at a much slower rate. 

Now multiply across every country where inflation is a problem and it’s no wonder the dollar has gotten 13% stronger in the past year.

Even places like Japan, once plagued with active deflation, are seeing their currencies erode. Japanese investors who want a real return on their money are happy with U.S. bond yields compared to what they can get at home. But they need to buy dollars to buy those bonds.

One day, the flow will reverse and we’ll be the ones wanting a hedge against a deteriorating currency. That’s when basic market math argues for cashing out depreciating assets (dollars) in favor of something that can gain value or at least maintain purchasing power a little better.

Generally that means foreign stocks, which are of course denominated in foreign currency terms. You don’t necessarily need to exchange your money for yen, euros or anything else to get exposure to these stocks . . . exchange-traded funds will do all the work for you . . . but you’ll see the impact either way.

And I don’t think the time is quite right yet. After all, most of the heat overseas is literally coming from oil exports and local oil producers. You can buy oil and oil stocks here at home.

Until we see signs of a real recovery beyond the energy sector, there’s little tangible reason to leave Wall Street for more exotic frontiers . . . unless, of course, novelty is what you really want. In that scenario, buy what you like. Explore the world. Just don’t look for bigger investment outcomes.