Over the past 10 years, U.S. stocks have compounded at annual rate of return of 12.6% versus 5.6% for non-U.S. developed market stocks and 3.5% for emerging market stocks.
Put differently, investors who put money in international stocks 10 years ago are looking at total gains of 40% to 70%. Investors who put money in the S&P 500 have more than tripled their investment.
If international stocks are going to catch up with the U.S., we basically need to see a total collapse in earnings and multiples in the U.S. and/or the exact opposite happen outside the U.S.
This is hard to imagine, especially given the negative impact that a collapse in corporate earnings in the U.S. would have on foreign countries and companies.
International stocks could possibly do better than U.S. stocks in the years ahead—but catching up is nearly impossible at this point.
Checking in on Mexico
For better or worse, I find it difficult it to go to another country (or frankly leave my house) without wearing my investor hat.
So when I accompanied my wife on a business trip to Mexico City last weekend, I as usual approached it, at least partly, as a fact-finding trip. To be clear, a long weekend away with your spouse is no substitute for investment research… but it can be eye-opening.
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