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International equities are a crucial part of a diversified portfolio. However, since the Global Financial Crisis of 2007-2009, the U.S. market has outperformed international markets by a wide margin, wide enough that you may have heard people question the merits of investing in foreign markets altogether. Consider the following table and observations:

  2009 2010 2011 2012 2013 2014 2015 2016 2017
S&P 500 26.46 15.06 2.11 16.00 32.39 13.69 1.38 11.96 21.83
MSCI ACWI Ex USA 41.40 11.15 -13.71 16.83 15.29 -3.87 -5.66 4.50 27.19

 

  • The S&P 500 has outperformed the MSCI ACWI Ex USA index, an index that covers approximately 85% of the global equity opportunity set outside the US1, in six of the last nine years as shown in the table above2.
  • From January 1, 2009 to December 31, 2017, the S&P 500 also produced a cumulative return of 259% compared to 120% for the MSCI ACWI Ex USA index.

As you can see, 2017 was a break from the recent trend of outperformance by United States stocks. Although the S&P 500 also had a great year, the MSCI ACWI Ex USA outperformed by 5.4%.

However, it’s worth looking further back in history to see how quickly things can change. Calendar years 2001 through 2008 told a different story. During this time frame, international markets (MSCI ACWI Ex USA) outperformed the S&P 500 six out of eight years.

  2001 2002 2003 2004 2005 2006 2007 2008
S&P 500 -11.89 -22.10 28.68 10.88 4.91 15.79 5.49 -37.00
MSCI ACWI Ex USA -19.73 -14.95 40.83 20.91 16.62 26.65 16.65 -45.53

 

Whether the coming years will see another period of sustained outperformance by international stocks no one really knows for sure. The nature of stock markets is unpredictable, especially in shorter time periods. The important thing is to maintain a globally diversified exposure so that wherever and whenever outperformance does happen, you will have the opportunity to capture it.

Is your portfolio appropriately diversified and set up for long-term success? If you’re not sure and would like a no-obligation second opinion, contact us.

1 https://www.msci.com/documents/10199/86494e1f-914e-4aa5-82a9-2e29ed5adbbf
2 Morningstar Direct

Please Note:  Past performance may not be indicative of future results.  Therefore, no current or prospective client should assume that future performance of his/her account will be profitable, or equal any corresponding historical index/benchmark referenced above.  The historical performance results for the comparative indices reflect reinvested dividends, but do not reflect the deduction of an investment management fee, which would have the effect of decreasing indicated historical index performance results. The historical performance results are provided exclusively for comparison purposes, to provide general comparative information to assist an individual client or prospective client in determining whether a certain type of asset allocation meets, or continues to meet, his/her investment objective(s). Index returns do not represent the performance of Foster Group or any of its advisory clients.

Please Also Note: (1) a description of each of the comparative indices is available upon request; (2) performance results do not reflect the impact of taxes; (3) It should not be assumed that a client’s account holdings will correspond directly to any such comparative benchmark index; and, (4) comparative indices may be more or less volatile than a client’s Foster Group account.

In the event that there has been a change in a client’s investment objectives or financial situation, the client is encouraged to advise Foster Group immediately.  Different types of investments and/or investment strategies involve varying levels of risk, and there can be no assurance that any specific investment or investment strategy (including the investments purchased and/or investment strategies devised or undertaken by Foster Group), will be profitable for a client’s or prospective client’s portfolio. Asset allocation and diversification do not ensure or guarantee better performance and cannot eliminate the risk of investment losses

PLEASE NOTE LIMITATIONS: Please see Important Advertising Disclosure Information and the limitations of any ranking/recognitions, at www.fostergrp.com/disclosures. A copy of our current written disclosure statement as set forth on Part 2A of Form ADV is available at www.adviserinfo.sec.gov.


PLEASE NOTE LIMITATIONS: Please see Important Disclosure Information and the limitations of any ranking/recognitions, at www.fostergrp.com/info-disclosure/. A copy of our current written disclosure statement as set forth on Part 2A of Form ADV is available at www.adviserinfo.sec.gov.