Why viewing the US as a safe haven could cost you (Part 1 of 5)
Since exiting the recession in mid-2009, US stocks have significantly outperformed international markets. But can the United States still be viewed as a “safe port” in a storm? Russ K explains why it might be time for investors to consider raising their allocation to international stocks.
In the past few years, having a strong U.S. focus has been a good trade. Since exiting the recession in mid-2009, US stocks (IVV) have significantly outperformed international markets.
Market Realist – The graph above compares the performances of the S&P 500 (SPY)(IVV) and the rest of the world as measured by the iShares MSCI ACWI ex-U.S. Fund (ACWX) since Q2 of 2008. While the U.S. index has given a holding period return of 37.7%, the latter fund has lost 15.6% since April 2008. That translates to a compound annual growth rate (or CAGR) of 5.0% for the S&P 500 compared to a CAGR of -2.6% for ACWX.
Also, a strong dollar (UUP) has played its part in reducing the already poor returns provided by international stocks (QWLD). Remember, a U.S. investor in foreign markets benefits if the U.S. dollar depreciates in the investment period.
Please read the next part of this series to learn why U.S. stocks have outperformed.
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