US-Stocks.jpg

US stocks outpacing international again in 2018

Heading into 2018, I listened to many strategy calls from the leading Wall Street players and the consensus view was pounding the table on international stocks over US stocks. Their call was in favor of international because of cheaper valuations and long-term under-performance. This didn't sit well with me. Sure valuation is cheaper but there is a reason for it. The European economy has been recovering from significant issues with a deep Greek recession, the surprise Brexit, and Deutsche Bank whose stock is trading below its crisis 2009 low. Just this week, the ECB cut their growth forecasts and announced they will keep rates at record lows for at least another year.

Here is the chart always universally referenced for the bull case for international stocks:

us vs intl

Runnymede favors US over International

The way we saw it was that the US corporations would see big benefits from tax reform, not international corporations. Furthermore, the IMF said back in October that growth in Europe and Japan were expected to slow. As investors, we favor companies (and countries) with steady or accelerating growth over ones with decelerating growth. This has played out as we expected. Global growth has been good in 2018 but there has been a sharp slowdown in European and Japanese manufacturing as seen in the chart below.

gdp growth 2018

US stocks leading the way

Given that US growth is the strongest, it is not surprising that US indices are leading the way this year. Technology stocks and small caps have reached new highs. Here are the results through June 14th.

us over intl 2018

Will US stocks continue to outperform international stocks forever? The answer is obviously no. At some point, international markets are bound to close the under-performance gap of the last 10 years. Reversion to the mean is almost inevitable. We just don't think the time is now.

subscribe to our podcast

 

 

Share This Story, Choose Your Platform!

About the Author: Chris Wang

Chris Wang

IMPORTANT DISCLOSURE INFORMATION 

Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Runnymede Capital Management, Inc.-"Runnymede"), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Runnymede.  Please remember that if you are a Runnymede client, it remains your responsibility to advise Runnymede, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Runnymede is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Runnymede's current written disclosure Brochure discussing our advisory services and fees is available for review upon request. Please Note: Runnymede does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Runnymede's web site or blog or incorporated herein, and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

Search Website

Annuity Review Database

Recent Posts

About our Podcast