The gap is wide. And widening. Don’t believe everything you read in the news.
Why do we say this? No, it is not a political commentary—it is a financial one.
In July, U.S. Large Company stocks, as measured by the Standard & Poor’s 500 Index, were up about 1.4%. Foreign stocks, as measured by the MSCI ACWI ex USA index, were down 1.1%, a difference of about 2.5% in one month!
Year-to-date July 31, the S&P 500 is up about 20%, and the MSCI ACWI ex USA index is up about 12%—not bad, but an 8% difference from U.S. Large Company stocks.
The MSCI ACWI Index—which is a total world stock market index including both U.S. and foreign stocks of large, medium, and small companies and is the stock market benchmark that we use—is up about 16% vs. the 20% for the S&P 500. Now, 16% is a great return, but it is 4% below the S&P 500, or about 20% less.
Calendar-year 2019 is on track to be the eighth year out of the last 11 since 2009 that U.S. stocks beat international stocks. For the 10 years ending 12/31/18, U.S. stocks beat international stocks 13% annualized vs. 6%, or a huge 7% annualized difference over 10 years. International stocks were superior in 2009, 2012, and 2017, so there were some indicators that the pendulum may swing.
When we say, “Don’t believe everything you read in the news,” we mean that the news outlets report only the Dow Jones Industrial Average, S&P 500, and NASDAQ, all of which are U.S. Large Company stock indices. So they are reporting only part of the story about daily and other short-term stock market returns.
Bottom line, in 2019 the world stock market is up about 16%—shy of the 20% reported by the news outlets, but still an excellent and above long-term average return.
Successful investing is a contrarian process that requires staying invested in out-of-favor asset classes, waiting for the pendulum to swing. It is fully reasonable to expect the pendulum to swing in favor of international stocks in the future. Patience is required.
The Capital One Data Breach
You may have read about the Capital One database hack. Theft of personal identification information is and will continue to be a fact of life. We recommend that you freeze your credit files at the major credit bureaus, including the Social Security numbers for your children.
A credit freeze can be more effective than credit monitoring since a freeze can prevent unauthorized activity, whereas monitoring may catch it only after the fact. Contact us if you wish to discuss this further.
Enjoy these final summer days!
As always, please contact us with any questions, news, or comments.