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The U.S. market has dominated international stocks for at least ten years now. However, this is expected to turn around next year.
Knowledge of the U.S. stock markets has shown that over the last decade, there has been consistent growth in general, ensuring that the market remains one of the best places to invest since 2010. However, if strategists and market analysts are to be believed, the U.S. market could soon lose the superiority it currently enjoys.
In the last ten years, U.S. stocks have been impressive, especially as international stocks, on the other hand, have sorely disappointed its players. The S&P 500, for example, has climbed over 180% in the same period but other markets have not been so lucky. Specifically, the MSCI ACWI ex U.S. exchange-traded fund (ACWX) has only increased by 18% in the same period, with the iShares MSCI Emerging Market Index climbing only 4%.
Even though they don’t think that U.S. stocks would crash, market strategists believe that these other poorly-performing markets will not stay relegated as from 2020, especially because valuations are starting to point in that direction.
ahas said that a rise in other stocks will happen because there is a noticeable awakening in other regions, suggesting growth. Berezin said:
“Having underperformed for more than ten years, non-US stocks are set to gain the upper hand over their US peers. A reacceleration in global growth, a weaker US dollar, and favourable valuations should all support non-US stocks next year.”
Evidently, the U.S. market is much more valued. The popular price-to-earnings ratio on the S&P 500 index is presently higher than 20, the best on average in more than 15 months. This performance is somewhat unsurprising, especially when the S&P 500’s recent new records are considered. By comparison, the ACWI is much lower, at 14.7. In addition to the U.S. market dominance, the Commerce Department has said that over the 2019 summer, its economy increased by 2.1%.
The factors affecting economies around the world have been biting quite severely. Manufacturing in Europe has been underperforming and back in October, crashed down to levels not seen since 2012. Even now, data from global information and analytics provider IHS Markit still shows that though there has been some increase, not much has changed.
Similar problems have been seen in other areas, most notably in the ongoing problems between the U.S. and China. At several points this year, the conflict got so heated up that the two countries enforced biting tariffs on each other. However, things might change soon.
While the conflict is still alive, the two countries have recently shown that they are more willing to reach an agreement, as they both try to iron out issues. In other regions, central banks are stepping in to solve problems as the Bank of Japan, for example, has tried to keep its policy quite favorable to encourage growth. Similar moves have also been made by the People’s Bank of China and the European Central Bank as well. All of these steps being taken by authorities around the world, point to the possibility of a better 2020 and beyond.
“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. At the end of 2020, I think we’re going to have a much different decade-long return for U.S. versus international,” explained Astoria Portfolio Advisors Chief Investment Officer John Davi.