«Watch out if the underperformance turns.»
Traders,
American equities have been trouncing their foreign counterparts for over a decade. So much so that many wonder why investors should even bother with overseas companies. But a longer view reveals that the pendulum eventually swings back to favor foreign companies.
Today’s chart tells the tale with a ratio chart of Emerging Markets vs. the S&P 500. When the line rises, emerging market stocks (think Brazil, India, China, and the like) outperform. When the line is falling, U.S. stocks outperform.
The past 12 years have seen a massive gulf between the two. Emerging markets are up 28%. Meanwhile, the S&P 500 has more than quadrupled! This has led to a large discrepancy between valuations.
EM is cheap. ‘Merica is rich. If you’re shopping for discounts, take a good look at EM.
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