International Markets

We last took a look at international markets back at the end of May.  Back then most markets overseas had returns on par with the US.  Most markets had shown returns between 1-2% as the summer began.  The lone exception was emerging markets.  Below is a chart of how all of these areas of the world have done since then: 

The rest of the world had a horrible summer.  Emerging markets fell apart but developed parts of the world were only marginally better and look downright pathetic against the US.  For comparison to the rest of the world, the S&P 500 is the dark red bar all the way to the left.  Also you can double-click on this chart to make it larger.  

There are a variety of reasons for why we've done so much better than the rest of the world but here are the big three: trade tensions, a stronger dollar as we raise interest rates and slower worldwide economic growth.  The question is how long this continues.  Certainly valuations abroad are much better than here.  That may not matter until some of these underlying issues get resolved.  

Still for patient investors it might pay to do some homework about investments abroad.  At some point this divergence will get resolved.  The broader question is does this divergence get resolved by a decline in US asset prices relative to the rest of the world or does the rest of the world play catch up to the US?  Anybody who can answer that riddle stands to profit handsomely.   Some of these markets pay decent dividends so you can be paid to wait.  Of course when investing abroad one has to be resigned to much higher historical volatility than here in the US and one also needs to understand that it is entirely possible these markets have farther to fall.

Do your homework!

Performance chart is from Stockcharts.com.

Back Wednesday.

*Long in client and personal accounts in some manner the indices listed above with the exception of Latin America.  Positions can change at any time without notice on this blog or via any other form of electronic communication.