If an investor is inclined to follow the markets they tend to follow one or two U.S. stock market indices. The most common are the S&P 500, Nasdaq and Dow Jones Industrial Average.
However, those incorporate just a minority of the publicly-listed stocks in the U.S. albeit the largest companies. A better proxy for the overall U.S. stock market is the Russell 3000. We also can’t forget to point out that there is still the rest of the world to consider.
The U.S. stock market has dominated foreign stocks since the Great Financial Crisis (see chart below: U.S. stocks in purple, foreign stocks in orange, and global bonds in blue).
It’s also important to note that foreign stocks have basically flatlined the last six months with the index making lower highs and lower lows.
Additionally, the foreign stock market is now trading below it’s 200-day moving average and also recently experienced a “death cross” where it’s 50-day moving average crossed below it’s 200-day moving average (see chart below).
These technical developments do not guarantee any outcome but they are commonly associated with downtrends and continued weakness.
Having said that, I believe foreign stock markets offer better return potential than U.S. stocks over the next 10-12 years due to far more attractive valuations. However, in the shorter-term, the recent developments are not favorable for foreign stocks. It’ll be interesting to see if the U.S. stock market can resist following the breakdown in the foreign markets or if foreign markets are the leading indicator.
Past performance is no guarantee of future results. All investments maintain risk of loss in addition to gain.
Data from third-parties is believed to be reliable but accuracy is not guaranteed. Much of the data used to interpret the markets and forecast returns are often at odds with each other and can result in different conclusions. Many different factors impact prices including factors not mentioned here.
This is not investment advice but merely a general commentary. Individualized investment advice cannot be provided until a thorough review of your unique circumstances and financial goals is completed.
Views provided here are current only as of the moment of posting and are subject to change at any time without notification.